Muthukrishna Aiyar and Others vs Veera Raghava Aiyar and Others

Arnold White, C.J.—Under Exhibit A the defendants mortgaged to the plaintiff a house and a promissory note which had been executed to

the defendants by a third party as security for money owing by the defendants to the plaintiffs. The promissory note was not endorsed to the

plaintiffs. It became time barred, and the question is whether on the taking of accounts the plaintiffs should be debited with the amount due on the

note. It was not suggested that the plaintiffs could sue on the note- It was contended that the note was evidence of a pre-existing debt due by the

3rd party to the defendants, that that debt was by the mortgagee assigned to the plaintiffs and that the plaintiffs being the parties who were entitled

to sue for the assigned debt were under an obligation to the defendants to do so before the right to recover the debt became barred by limitation.

The promissory note refers to a pre-existing debt due by the 3rd party to the defendants, but I have had some doubt whether on the documents

alone coupled with the fact that the maker of the note attested the mortgage to the plaintiffs-and that is all we have to go on-there is evidence of a

pre-existing debt. No attempt appears to have been made to show that there was no debt (in the court of first instance the defendants sought to

show that the amount due on the note had been paid) and I think we are warranted in holding that there was a debt. The mortgage thereof was in

my opinion a transfer of an actionable claim within the meaning of Section 130 of the Transfer Property Act which vested in the transferee the

rights and remedies of the transferor, subject to the equities which remained in the transferor by reason of the fact that the transfer was by way of

security. This is in accordance with the decision of the Privy Council, in the recent case of Mulraj Khataw v. Visvanath Prabhuratn Vaidhya (1912)

24 M.L.J. 60 which does not appear to have been reported when this appeal was argued before Sundara Aiyar and Sadasiva Aiyar JJ. In the

Privy Council case the contest was between a party who held an assignment in writing of a policy and parties holding a deposit of the policy by

way of security which was earlier in date than the assignment in writing. Their Lordships held in favor of the party holding the written instrument. In

the judgment they observe, with reference to the assignment in writing : "" It may well be that although absolute in form it was intended to be only by

way of security so as to be subject to a right of redemption, but this does not affect the rights of the parties under the circumstances of the present

case."" And again "" He (the party claiming under the instrument) has an absolute right to the proceeds of the policy."" The rights of the transferor

being vested in the transferee by the express words of the section, the transferee is the only party entitled to sue, and this being so, he is, I think,

accountable to the transferor for having allowed the remedy to become time-barred.

I do not think any useful purpose will be served by a discussion of the English authorities. The cases turn on the language of Section 25(6) of the

English Judicature Act, 1873. In the Privy Council decision to which I have referred, their Lordships observe, "" The error [of the court in India]

arose from the learned judges not having appreciated that the positive language of the section precluded the application in India of the principles of

English Law on which they based their decision"".

I only propose to refer to one authority the decision of the Privy Council in Shyam Kumari v. Someshwar Singh ILR (1901) C. 27. There the

mortgagors assigned to their mortgagee a debt due to them from a third person, and in taking the account of what was due to the mortgagee, the

Courts in India debited him with the amount of the debt though he had not received it.

It was held, that it lay upon the mortgagee to use reasonable diligence to recover it from the debtor, and it appearing that no serious attempt had

been made to do so it was held that it had been rightly debited in the account.

I think this appeal fails and should be dismissed with costs.

Miller, J.

I am of the same opinion. After the recent decision of the Privy Council in Mulraj Khataw v. Visvanath Prabhuram Vaidhya (1912) 24 M.L.J.

60 it seems impossible to contend that a hypothecation of a debt is not a transfer of an actionable claim within the meaning of Section 130 of the

Transfer of Property Act. Their Lordships held that by that section a writing is required to effect a charge on an actionable claim. It follows that the

remedies of the mortgagor are transferred to the mortgagee of the debt and he is entitled to recover the sum due from the debtor and if so entitled

then he is rightly made liable if he without justification allows the debt to become irrecoverable (Shyam Kumari v. Rameswar Singh ILR (1904) C.

27.

In the present case an attempt was made in the Court of first instance to show that by agreement the 1st defendant was to recover the amount of

the debt, but the District Munsif held that the provisions of Ex. A were clear, and there was no need to consider the oral evidence and it seems that

the point was not pressed either in the District Court or here at the hearing of the second . appeal, and we were not asked by the appellant to re-

open the question on the evidence and must therefore proceed on the footing that there was no contract altering the position of the parties. We

must deal with the case on the provisions of Section 130 apart from any contract. The plaintiffs endeavoured but failed to prove that the debt

mortgaged had been by him paid to the 1st defendant and did not so far as I can see ever allege that the promissory note which was handed over

to the plaintiff did not represent a debt which could be assigned. I find no difficulty therefore in accepting the view taken by all the Courts which

have dealt with the matter so far, that what was mortgaged was a debt evidenced by the promissory note.

That being so it lay upon the. plaintiffs to show that they Were not in fault in allowing the recovery of the debt to be barred by limitation and they

made no attempt to show that. There it was contended that the 1st Defendant was equally entitled to recover debt and therefore the plaintiffs

cannot be made liable, the default was as much that of the one as of the other.

But the remedy open to the 1st defendant as creditor had passed by Section 130 of the Transfer of Property Act to the plaintiffs : what was

retained by the 1st defendant was his right to redeem the mortgage. This contention is therefore of no avail and moreover was not so far as I can

see raised at any previous stage of the case. I concur in dismissing the appeal with costs.

Oldfield, J.

I concur in the decisions of my learned colleagues for the reasons given by them and I have nothing to add.