Mahabir Das vs Jamuna Prasad Sahu and Others

Das, J.—This appeal comes before us from the judgment of the learned Subordinate Judge of Monghyr, dated 5th June 1925 and arises out of a suit instituted by the respondents to enforce a mortgage executed on 25th September 1905 by one Mr. Barrow as the certificated guardian of the defendant appellant. The defendant is the mahanth of Suja asthal. It appears that on the death of his predecessor-in-title, mahanth Jagarnath Das, there was considerable litigation on the question of succession to the asthal. One Sia Ram Das claimed the asthal to the exclusion of Mahabir Das and it appears that Sia Ram Das actually took possession of the asthal properties. Thereupon a suit was instituted on behalf of Mahabir Das through one Sarjug Das for declaration of the title of Mahabir Das to succeed to the Suja asthal as a successor of Jagarnath Das and for recovery of possession of the properties belonging to the asthal. Mahabir Das failed in the Court of first instance. On appeal a compromise was entered into by the parties in the Calcutta High Court. By the terms of the compromise the asthal properties were equally divided between the contending parties; and it was provided by the consent decree of the Calcutta High Court dated 18th November 1901 that Sarjug Das would be entitled to recover RS. 31,000 from Mahabir Das and Sia Ram Das. Mr. Barrow was appointed by the District Judge of Bhagalpur as the guardian of Mahabir Das who was then a minor. The estate of Mahabir Das was heavily involved and on or about 5th May 1905, Mr. Barrow applied to the District Judge of Bhagalpur for permission to raise a loan of Rs. 30,000 on the mortgage of the interest of Mahabir Das in the disputed properties to pay off the debts that were binding upon the estate. We have not before us all the proceedings which took place before the learned District Judge, but we have the letter of Mr. Barrow dated 5th May 1905 which ought to be set out in full:

From Wynford Barrow, Esqr., Manager and guardian of minor mahanth of Suja, Begusarai.

To

L.C. Adami, Esqr., I.C.S.,

District Judge, Bhagalpur.

Dated Monghyr 5th May, 05

No. 89-9 p.

Sir,

This estate owes the following amounts:

(a) High Court decree for coats Rs. 5,000, minor''s share.... Rs. 2,500

(b) Decree obtained by Dalip Narain Singh Backer: minor''s share.... Rs. 2,500

(c) Babu Gobind Sahai about Rs. 8,000, minor''s share.... Rs. 4,000

(d) Compromise decree (Sarjoo Das), minor''s share.... Rs. 18,000

I have therefore to provide Rs. 27,000 to clear off the share of the debt due by the minor.

This debt.

(a) Is the amount decreed as costs in High Court case. (Sooja Estate v. Tagore Estate) our village of Tikarampur has been attached in execution and the sale is fixed for the 22nd instant.

(b) Babu Dalip Narain Singh of Monghyr obtained two decrees for about Rs. 5,000 against the estate. One decree was appealed and is under consideration; the other I was not able to appeal as I had not enough money. This latter decree is under execution and has to be met.

(c) Babu Gobind Sahai, Banker of Monghyr, is the tipdar or agant for paying Government revenue for this estate. As such he has advanced something like Rs. 8,000 of which Rs. 4,000 is the minor''s portion.

(d) This is the compromise decree amount due to Surjoo Das.

I, therefore, ask to be allowed to raise a loan of Rs. 30,000 (thirty thousand rupees) on the minor''s share of the estate mortgaging villages to that extent.

The loan is absolutely required.

I have the honour to be,

Sir,

Your moat obedient servant,

(Sd.) W. Barrow.

It will appear from this letter that although Mr. Barron set out in detail the debts mounting to Rs. 27,000 which had to be immediately paid off, he distinctly alleged that it was necessary for him to raise a loan of Rs. 30,000. Then the next document to which I need refer in this connexion is an order dated 11th May by the District Judge of Bhagalpur and which is to this effect:

Letter received from Mr. Barrow, Receiver asking to raise loan of Rs. 30,000 on the minor''s share of the estate mortgaging villages to that amount. Reply asking for full statement as to the means by which the loan is to be raised i.e., from whom, rate of interest proposed and also which villages he intends to mortgage. Ask for information by 19th.

We have not in the record of this appeal the information supplied by Mr. Barrow but we have an order in the order-sheet dated 14th September l905 which runs as follows:

Mr. W. Barrow, the manager and guardian of Shuja estate is permitted to borrow Rs. 80,000 at 12 per cent interest and 6 per cent. commission on mortgage of the properties belonging to the minor, from Babu Gauri Shanker, Banker of Motihari. The terms of the banker are high especially the commission; but to save the estate and as better terms cannot be got elsewhere the loan is sanctioned.

In pursuance of the order of 14th September 1905 the mortgage bond in suit was executed on 25th September 1905. The mortgage bond recites the following necessities:

(1) Rs. 1,932-5-9 due on account of a decree for costs which were sought to be realized in execution case No. 712 of 1904 at the instance of Mr. Dunn, Receiver of the estate of Prasanna Kumar Tagore. It was stated that the properties belonging to the minor had already been attached and were to be put up for sale on 25th September 1905.

(2) Rs. 1,561 due on account of a decree dated 23rd December 1904, in favour of Dalip Narain Singh of Monghyr. It was stated that the properties of the minor had already been attached in pursuance of the decree and were to be put for sale on 31st October 1905.

(3) Rs. 3,500 due to Gobind Prasad Sahu, who it was stated was about to institute a suit for recovery of the sum.

(4) Rupees 18,245 11-0 due to Mahanth Sarjug Das in respect of the compromise. decree entered into with the sanction of the District Judge.

(5) Rupees 2,900-15-3 for meeting the expenses in connexion with the prosecution of the case of the Suja estate.

It was also recited in the bond that Rs. 11,800 was retained by the mortgagee as commission in respect of the loan made.

Now it will be noticed that, there is Some difference between the items as set out in Mr. Barrow''s letter of 5th May 1905 and the items as set out in the mortgage bond, and I shall have to deal with the argument that has been founded on this difference. It is not disputed that consideration passed in respect of the transaction which is the subject matter of the suit except in regard to the sum of Rs. 1,800 which was retained by the mortgagee as commission. It is contended, however, that except in regard to items (1) and (2) there is no evidence of any, legal necessity and that accordingly the plaintiff''s suit must fail except with regard to items (1) and (2). It is alternatively contended that should this Court come to the conclusion that there was necessity to support the transaction of 25th September 1905 this Court should not direct a sale of the mortgaged properties, but should give the plaintiff a decree for recovery of the amount due to him out of the rents, issues and profits of the Suja estate, and for that purpose this Court may properly appoint a receiver to take charge of the mortgaged properties.

I will deal with the question of legal necessity. It appears to me that having regard to the sanction of the learned District Judge permitting the certificated guardian to raise a loan of Rs. 30,000 the question is not available to the defendant. It was in the first instance contended that the sanction given in the case merely affects the question of onus of proof and does not debar the defendant from raising the question of legal necessity and establishing the want of it by proper evidence; and in support of this proposition Sir Sultan Ahmad relies upon the decision of the Madras High Court in Nallaka Venkataswami and Others Vs. Rugam Viranna and Another, , Before dealing with that case I propose to deal with the provisions of the Guardians and Wards Act, and with two decisions, one of the Calcutta High Court and the other of the Judicial Committee of the Privy Council. Section 29, Guardians and Wards Act, provides that where a person other than a Collector, or a guardian appointed by will or other instrument has been appointed or declared by the Court to be guardian of the property of the ward he shall not, without the previous permission of the Court, (a) mortgage or charge or transfer by sale, gift, exchange or otherwise any part of the immovable property of his ward. It is immaterial to quote para. (b) of that section. Section 31 provides that permission to the guardian to do any of the acts mentioned in Section 29 shall not be granted by the Court except in case of necessity or for an evident advantage to the ward.

Para (2), Section 31 is important and should be quoted in full. It runs as follows:

The order granting the permission shall recite the necessity or advantage as the case may be, describe the property with respect to which the act permitted is to be done and specify such conditions if any as the Court may see fit to attach to the permission and it shall be recorded dated and signed by the Judge of the Court with his own hand or, when from any cause he is prevented from recording the order with his own hands, shall be taken down in writing from his dictation and be dated and signed by him.

Now it is obvious that the Guardians and Wards Act throws the entire responsibility for granting permission to the guardian to do any of the acts mentioned in Section 29 upon the civil Court and it is undoubted that the civil Court which in this case must mean the Court of the District Judge must exercise the utmost circumspection before granting permission to a guardian to do any of these acts. It follows therefore that a due enquiry by the civil Court must take place before the permission can be granted by it to the guardian to do any of those acts. The question therefore arises whether having regard to the fact that the statute assumes that the civil Court makes due enquiry into the necessities before granting the requisite permission the creditor lending money should require further proof of legal necessity before making the advance. The question was debated at great length in Sikher Chand v. Dulpatty Singh [1879] 5 Cal. 363. In that case two elder brothers of a family being heavily indebted applied for and obtained from the District Judge an order u/s 18, Act 40, 1858, for the sale of several portions of the ancestral estate and sold them under registered deeds signed by the Judge to one who was the principal mortgagee in respect of the debts for which the properties were sold to him. The plaintiff alleging himself to be the adopted son of one of the brothers brought several suits against the purchasers to set aside the sales and recover back his share of the property alleging that the two elder brothers had made the sale fraudulently and illegally to satisfy personal debts of their own. The question arose whether in answer to the suit it was necessary for the purchaser to establish legal necessity. Sir Richard Garth pointed out that before the passing of Act 40 of 1858 a purchaser buying immovable property of a minor was bound to enquire into the circumstances which rendered the sale necessary and to satisfy himself as an honest man of the existence of such necessity. He then referred to the terms of Section 18, Act 40, 1858 and said as Follows:

It was intended by this section not only to protect the interests of minors, but to throw upon the civil Courts a large share of the duties and responsibilities which had previously been thrown upon guardians and to which the latter had been found as a rule deplorably unequal.

The learned Chief Justice proceeded to say as follows:

If under those circumstances the Judge upon whom the responsibility is thus thrown by the law makes an order for sale it seems to me in the highest decree unreasonable to say that a party purchasing under that order is bound to make the same enquiry which the Judge had made, and to determine for himself whether the Judge has done his duty properly and come to a right conclusion. If this were so, a purchaser buying under an order of the Court would be under the same obligation, and would obtain no better title than if he had bought direct from an uncertificated guardian. Unless sales made under the authority of the Court are to have to some extent at least the protection which they have in England, it seems to me that the provisions of Section 18 will only be made a snare to delude unwary purchasers; that these sales will be questioned and litigated almost as frequently as they were before the Act passed and that minor''s estates can never be expected to sell (any more than they were before the Act) for anything like an adequate price.

With all respect I entirely agree with the view which was taken in this case and it seems to me that this view was affirmed in a very conspicuous manner by their Lordships of the Judicial Committee in Ganga Prasad Sahu v. Maharani Bibi [1884] 11 Cal. 379. The particular passage to which I am referring will be found at p. 383 and it runs as follows:

Their Lordships think that when an order of the Court has been made authorizing the guardian of an infant to raise a loan on the security of the infant''s estate, the lender of the money is entitled to trust that order, and that he is not bound to inquire as to the expediency or necessity of the loan for the benefit of the infant''s estate.

Their Lordships, however, made it clear that

if any fraud or underhand dealing is brought home to him that would be a different matter; but, apart from any charge of that kind, their Lordships think he is entitled to rest upon the order.

I take, the decision of the Privy Council as deciding finally that the order of the District Judge is conclusive on the question of legal necessity or, which is the same thing, of due and honest inquiry by the creditor, except in a case of fraud or underhand dealing on the part of the mortgagee or purchaser as the case may be.

But it is said that the Madras High Court has taken a different view: see Nallaka Venkataswami and Others Vs. Rugam Viranna and Another, . That case, let it be conceded, took the view that the sanction of the District Judge to an alienation of the minor''s property by the guardian under the Guardians and Wards Act is only prima facie evidence that the transaction is a good one, but will not cure any inherent defect that may exist in it; and their Lordships pointed out that the minor may at any future time show that it was fraudulent and improper, and not for the benefit of the minor; but the burden of proof would be open him to show that it was so. Now, if their Lordships intended to lay down that all that is open to a minor afterwards is to show a fraudulent or improper conduct on the part of the mortgagee or a purchaser, as the case may be, then I entirely agree with the decision; but if their Lordships intended to lay down that the sanction of a District Judge affects merely the question of onus of proof and that it is always open to the minor on attaining full age to impeach the transaction entered into by the certificated guardian with the sanction of the District Judge by establishing that there was no legal necessity in respect of these transactions, then with all respect I dissent from that decision; and in support of the conclusion at which I have arrived the simplest of reasons may be given. That reason is that it is not necessary for the creditor to establish legal necessity; it is sufficient if he satisfies the Court that he made an honest enquiry into the existence of the legal necessity. The observations of the Judicial Committee in the leading case of Hunnoomanpersaud Panday v. Mt. Babooee Munraj Koonweree [1856] 6 M.I.A. 393 will bear repetition. Their Lordships said as follows:

Their Lordships think that the lender is bound to enquire into the necessities for the loan, and to satisfy himself, as well as he can, with reference to the parties with whom he is dealing, that the manager is acting in the particular instance for the benefit of the estate. But they think that if he does so inquire and act honestly the real existence of an alleged sufficient and reasonably-credited necessity is not a condition precedent to the validity of his charge, and they do not think that, under such circumstances, he is bound to sea to the application of the money.

Now, if this be the law, as I apprehend it must be, then it follows that it is not necessary for a creditor to make an inquiry if the District Judge has already made it. As I have pointed out, according to the scheme of the Guardians and Wards Act, the entire responsibility for making an enquiry as to the existence, to adopt the words of the Judicial Committee, "of an alleged sufficient and reasonably-credited necessity" lies upon the District Judge. It is the District Judge who is to conduct that enquiry, and it seems to me that a party who enters into a transaction on the faith of an order of the District Judge is entitled to assume that proper inquiry has in fact been made by the District Judge and that the District Judge has been satisfied as to the existence of the necessity. If this were not so the most obvious injustice might result to persons who act upon the faith of orders that may be passed by District Judges relating to transactions with a minor''s estate; and I cannot possibly persuade myself to accept the view that the existence of an order by a District Judge affects no more than the Question of onus of proof. In my opinion the existence of such an order is conclusive on the question of due enquiry which is all that is necessary to be made by a creditor, unless it is shown that the creditor was a party to a fraudulent misrepresentation to the District Judge.

It was then contended that the order of the District Judge does not comply with the provision of Section 31, para. 2, Guardians and Wards Act, and that there fore there is no presumption of the correctness of the order, and the question of the existence of legal necessity consequently falls to be considered in this case.

Now I must point out that it is necessary for the District Judge when giving permission u/s 31, para. 1, Guardians and Ward''s Act, to comply with the provision of para. 2 of that section. The Act appears to lay down in specific terms that the District Judge granting permission must comply with the requirements of para. 2 and it is difficult to understand on what ground the clear provisions of para. 2 are not always observed. But that is not the question before us. The question is whether the fact that the learned District Judge has not recited the necessity or advantage for the transaction in the order granting the permission makes the order so open to attack that it is still necessary for the creditor to prove the existence of the legal necessity. There are undoubtedly cases in the books which lay down that disobedience of the provisions of para. 2 to Section 31 has the effect of rendering the order of the District Judge null and void; but I am unable to understand on what ground the order can be treated as a nullity. No doubt it is an irregularity, and, it may be, a serious irregularity; but the order exists and the existence of the order cannot be affected by reason of the fact that the learned District Judge forgot to read the provision of para. 2 of Section 31. Fortunately for the plaintiff in this action a saner view has been taken in many of the cases, and especially in the cases decided by the Calcutta High Court. I will refer to one of those cases, the case of Rameshwar Singh Bahadur v. Dhunpat Singh [1909] 11 C.L.J. 197. The view taken in that case was that a mortgage executed by a certificated guardian of a minor''s property, in pursuance of a permission obtained on misrepresentation of fact and not by fraud, is a valid mortgage, even though the permission ought not to have been granted; and their Lordships took the view that a mortgagee is not bound to go behind the order of the Court permitting the mortgage, where no case of fraud exists. Dealing with the precise point which I am now considering, their Lordships pointed out that an order granting permission to the guardian to transfer is sufficient if it substantially, though not in form, complies with the provisions of Section 31, Guardians and Wards Act; and that an order not reciting the necessity for which the loan was required is valid, if the petition on which the order was granted contained the requirements provided in Section 31 of the said Act. But Sir Sultan Ahmad contends as follows:

Look at the petition upon which the actual order was obtained and look at the mortgage bond.

So far as the petition upon which the order was obtained is concerned, debt to the extent of Rs. 27,000 is disclosed and it was contended that the items of debts as set out in the mortgage bond do not agree with the items as set out in Mr. Barrow''s letter of 5th May 1905. Now the criticizm is true enough; for instance, in the letter of Mr. Barrow, it is stated that there was a debt of Rs. 2,500 due in respect of the "High Court decree for costs,'' whereas in the mortgage bond it appears that Rs. 1,992 5-9 was due in respect of those costs. In Mr. Barrow''s letter Rs. 2,500 was said to be due on account of Dalip Narain Singh''s decree, whereas in the mortgage bond we find that Rs. 1,561 was due to Dalip Narain Singh. In Mr. Barrow''s letter Rs. 4,000 was said to be due to Gobind Prasad Sahur, whereas in the mortgage bond we find that Rs. 3,500 was due to Gobind Sahu; and in regard to Surjug Das''s decree, Mr. Barrow''s letter shows that Rs. 18,000 was due in respect thereof, whereas we find from the mortgage decree that Rs. 18,245-11-0 was due in respect thereof; and there is one item which is not to be found in Mr. Barrow''s letter at all, which is an item for Rs. 2,900-15-3 for meeting expenses in connexion with the prosecution of the case of the Suja Estate.

Now so far as the argument based on the difference in figures is concerned, it is not entitled to succeed at all unless we hold that the minor on attaining majority is entitled to say that the District Judge did not make a proper enquiry into the matter. As a matter of fact there is no necessity to take this extreme view of what the District Judge did in this matter. In Mr. Barrow''s letter of 5th May he was giving the figures approximately, and there is no reason to take the view that in response to the order of the learned District Judge Mr. Barrow did not supply the correct figures later on. We have not all the materials before us, and in the absence of those materials it is not possible for us to come to any conclusion on this point. I will assume that the enquiry conducted by the learned District Judge was perfunctory in its nature; but that does not help the case of the plaintiff at all; for, as I understand the law, it is not open to a minor on attaining majority to attack a mortgage transaction entered into on his behalf by his certificated guardian with the sanction of the District Judge on the ground that he should never have granted his authority. In support of this view I refer to the decision of the Calcutta High Court in Maharaja Sir Rameshwar Singh Bahadur v. Dhunpat Singh [1909] 11 C.L.J. 197. What then remains? We have debts amounting to Rs. 27,000 disclosed in Mr. Barrow''s letter of 5th May 1905. We have further the assertion of Mr. Barrow in that letter that he wanted Rs. 30,000 to meet all the demands upon the estate. Assume that he disclosed debts to the extent of Rs. 27,000. The mortgage bond must then be good to the extent of Rs. 27,000. There only remains another Rs. 3,000, and upon the latest decision of the Judicial Committee we must assume that there was legal necessity in respect of the small portion not accounted for, for a mortgagee dealing with a certificated guardian cannot be in a worse position than if he had dealt with an uncertificated guardian.

If there was no question of the order of the learned District Judge in this case and if the plaintiff had satisfied the Court that there was legal necessity in respect of Rs. 27,000 out of Rs. 30,000 which he had lent he would, on the latest decision of the Judicial Committee be entitled to a decree for the whole of the amount. I hold that so far as Rs. 27,000 is concerned, legal necessity is established upon the order of the learned District Judge and in regard to the balance, the plaintiff must have a decree for that amount on the theory that it bears a small proportion to the total sum raised; and legal necessity must be presumed in respect of that small sum. When I say that legal necessity must be presumed in respect of the balance I must not be understood as meaning that legal necessity must be presumed in respect of the entire amount irrespective of the question whether it had actually been advanced or not. On that I shall have something to say later on. In my opinion on the provisions of Section 31, Guardians and Wards Act and on the decision of the Judicial Committee in Ganga Prasad Sahu v. Maharani Bibi [1884] 11 Cal. 379, the decision in Sikher Chand v. Dulputty Singh [1879] 5 Cal. 363 and the decision in Maharaja Sir Ramieshwar Singh Bahadur v. Dhunpat Singh [1909] 11 C.L.J. 197, I must hold that legal necessity is established in respect of whatever was advanced by the defendant to the plaintiff on the transaction of 25th September 1905.

I do not propose, however, to rest my decision on my view of the law on the point. I propose to deal with the question of legal necessity. (The judgment then dealt with the question of legal necessity and found that legal necessity existed in respect of the first four items, but not in respect of the fifth. It then concluded.) Even if there is no legal necessity in regard to this point we should assume legal necessity having regard to the fact that legal necessity has been established in regard to most of the items mentioned in the mortgage bond.

I now come to the question, whether the plaintiff is entitled to recover back Rs. 1,800 with interest thereon although he admits that this sum of money was not paid to the defendant. Mr. Jayaswal contends that this was really not appropriated by the plaintiff but constituted gadiana charges, that is to say, charges exacted not by the mortgagee but by the servants of the mortgagee. But so far as the account book is concerned, it shows that the money was appropriated by the plaintiff and in my opinion it is conclusively established that this sum of money was in fact not paid to the defendant. Mr. Jayaswal no doubt relies upon the order of the learned District Judge who sanctioned the payment of a commission to the mortgagee; but so far as this item is concerned the question, as I understand it, is not of one of legal necessity but one of passing of consideration; and it is established that this sum of money was in fact not paid to the defendant, I am of opinion that the plaintiff cannot recover this sum of money.

The only other question which was argued before us is that, having regard to the fact that the properties are asthal properties we should not direct a sale of the mortgaged properties but should put the properties in the charge of a receiver and direct the receiver to discharge the mortgage debt out of the rents, issues and profits. Sir Sultan Ahmad relied upon the decision of the Judicial Committee in Niladri Sahu v. Chaturbhuj Das AIR 1926 P.C. 112, but, as I understand that decision, it does not lay down as a point of law that in every case where properties are mortgaged by the shebait or Mahanth of an endowment the only decree which the Court can pass is a decree entitling the plaintiff to realize his claim out of the rents, issues and profits of the estate. In the leading case of Prosunno Kumari Debya v. Gulab Chand Baboo [1875] 2 I.A. 145 it was pointed out that the

authority of the shebait of an idol''s estate would appear to be in this respect

that is to say, in respect of charging the properties of the idol,

analogous to that of the manager of an infant heir.

If this be so, then it would follow that although the property devoted to religious purposes is, as a rule, inalienable, it is competent to the Court to direct the sale of such property if it is satisfied that the loan was raised for a necessary purpose. In this case there are unsurmountable difficulties in our way in appointing a receiver to take charge of the mortgaged properties. Some of the mortgaged properties have already passed by sale to outsiders, and some of them are in the possession of a mortgagee; and it appears that there are various creditors of the estate. In these circumstances, I am of opinion that the decree for sale passed by the learned Subordinate Judge is the proper decree to pass under the circumstances.

Except in regard to the sum of Rs. 18,000 the appeal fails and it must be dismissed with costs. Another account will have to be framed in this office to ascertain the exact sum of money due to the plaintiff.

Allanson, J.

I agree.