Nandalal Banerjee vs Ocean Accident and Guarantee Corporation Limited

Das Gupta, J.—The Appellant is the Defendant in a suit for enforcement of a mortgage said to have been effected by him by deposit of title deeds.

A decree for arrears of rent having been passed against the present Appellant, it was put into execution in the court of the Second Subordinate Judge of Hooghly. An appeal was preferred against the decree and an application for stay of proceedings in the execution case was made. The learned Subordinate Judge thereupon passed on November 15, 1941, the following order:

...I accordingly direct that the judgment debtors must either deposit the decretal amount in court within 15 days or furnish security from some Insurance Companies to the satisfaction of the decree-holder within the said period. If no such deposit be made or security furnished within 15 days, the properties will be advertised for sale....

The period was thereafter extended and a security bond, the bond which has been marked ext. 8 in this case, was executed by the Appellant and the Respondent. By this bond the Appellant and the Respondent-

are jointly and severally held and firmly bound unto the Subordinate Judge, Second Court, Hooghly, his successor and successors in office and assigns in the sum of Rs. 18,767-9-3 pies of good and lawful money of British India to be paid to the said Subordinate Judge of Hooghly his successor or successors in office or assigns, as the case may be. The condition of the above written bond or obligation is such if the Appeal from the Original Decree No. First Appeal 203 of 1941 being an appeal preferred against the judgment and decree passed by the Subordinate Judge, Second court, Hooghly in Rent Suit Misc. J. Case No. 84 of 1941 are allowed then in such case the above written bond or obligation shall be void and of no effect.

Before this bond was executed the title deeds of certain properties belonging to the Appellant were admittedly deposited by the Appellant with the Respondent company and an indemnity bond, ext. 6, was also executed. It was contended by the Defendant that this document required registration u/s 17(1)(b) of the Indian Registration Act and as it was not registered it could not be received in evidence and at the same time no oral testimony to prove the creation of the mortgage could be received in view of the provisions of Section 91 of the Indian Evidence Act.

The learned court below however held that this document did not purport or operate to create any rights and therefore did not require registration. He passed a decree in the preliminary form for the sum of Rs. 20,083-6-6 which was made up of Rs. 19.683-6-6 paid by the Plaintiff company in pursuance of a writ of attachment issued by the Original Side of this Court where execution of the security bond was sought by the decree-holder and a sum of Rs. 400 which was shown to have been paid by the Plaintiff company to their Solicitors.

The principal question raised in appeal is whether the learned court below is right in its conclusion that the document did not require registration. The criterion for deciding whether such a document requires registration is whether the document constitutes the bargain. From the mere fact of deposit of title deeds coupled with an advance of money the courts will imply an agreement to create a charge. If however the parties choose to reduce the bargain into writing, the document must be registered. In the case of Hari Sankar Paul v. Kedar Nath Saha (1939) L.R. 66 IndAp 184 : ILR (1939) Cal. 243 the Privy Council after referring to Lord Carson''s judgment in the case of 35 CWN 494 (Privy Council) observed:

While their Lordships do not think that the language of Lord Carson conveys or was intended to convey the meaning that memorandum relating to a deposit of title deeds can be within Section 17 of the Indian Registration Act unless it embodies all the particulars of the transactions of which the deposit forms part, their Lordships are of opinion that no such memorandum can be within the section unless on its face it embodies such terms and is signed and delivered at such time and place and in such circumstances as to lead legitimately to the conclusion that so far as the deposit is concerned it constitutes the agreement between the parties.

In Hari Sankar Paul''s case the deposits had been made some time before the written memorandum and their Lordships pointed out:

Having purported to create a morgtage by delivery of title deeds, the parties proceeded to create it over again in writing. ''The memorandum does not merely evidence a transaction already completed; its language is operative. It is contractual in form, and it embodies an agreement that the title deeds in question are to be held as security for the advances made, and it speaks of the moneys ''hereby secured''....

Their Lordships -further remarked:

The leading feature of this case is that the Appellants advisers were evidently quite aware of the niceties of the law in the matter, and deliberately endeavoured to effect a valid mortgage by delivery of title deeds and at the same time to accompany it with an effective written document which would nevertheless not require registration. The Appellants, in their Lordships'' opinion, have over reached themselves, and have failed to achieve their purpose.

In my judgment, the criticism made by the Privy Council in Hari Sankar Paul''s case is fully applicable to the document, ext. 6, in the present case. The relevant portion of the document is in these words:

...I further undertake and agree to deposit the title deeds in respect of my Zemindary properties, viz., Char Bazramari, Cham Sunderpur and Mouzas Abdulpur, Ishra and Radhanagore Touzi No. 268 of the Hooghly Collectorate, which are free from encumbrances as counter security with the said Corporation until such time the liability of the said Bond is fully discharged. Further I undertake and agree that I shall deposit the rents periodically in respect of my all Zamindary properties after payment of the establishment charges, etc. with the Corporation as counter security until liability under the Bond is terminated. I further undertake and agree that if the Corporation shall have to pay any claim in connection with above Bond they said Corporation will be at liberty to reimburse their claims, if any, out of the sale proceeds of the said hypothecated Zamindary properties including disputed property for which I have obtained an order from the said Hooghly court.

It was argued before us that the words "I further undertake "and agree to deposit the title deeds" clearly show that the document was not operative and all that was meant was that if and when the title deeds were deposited, the Respondent would be able to reimburse their claims out of the sale proceeds of the properties. In my judgment, that is not a proper interpretation put on the language of the document having regard to the time and place and the circumstances in which this was signed and delivered. The evidence leaves no doubt that ext. 5 and ext. 6 were written out and the title deeds deposited at about the same time. There is no justification for saying that though the Appellant used the language,

I further undertake and agree that if the Corporation shall have to pay any claim in connection with above Bond they said Corporation will be at liberty to reimburse their claims, if any, out of the sale proceeds....

he did not mean it to have operative force. Looking at the language and the circumstances in which the document was signed and delivered, I do not think it can be doubted for a moment that this document itself purported to create the charge and the language "I further undertake and agree to deposit the ''title deeds" was used in a vain attempt to make it appear that such was not the case.. This attempt to evade the requirement of Section 17 of the Registration Act cannot be allowed to succeed in view of the language used in the concluding portion of the document.

My conclusion therefore is that this document required registration u/s 17(1)(b) of the Indian Registration, Act and as it was not registered it was not receivable in evidence. In view of Section 91 of the Indian Evidence Act oral testimony as regards the transaction is also not admissible. The Plaintiff''s claim for enforcement of a mortgage effected by deposit of title dead must therefore fail.

There was an alternative prayer; in the plaint for, a money decree. The learned advocate for the Appellant did not dispute the fact that the Appellant is bound to pay to the Respondent the sum of Rs. 18,767-9-3 pies. He contends, however; that the money decree should be limited to this amount, only and that no decree should be passed for the additional amount which the Respondent company paid to the decree holder.

It is argued, in the first place, that the bond being in favour of "the Subordinate Judge, Second court of Hooghly and his "successors" could not be executed. It is argued next that even if execution could be ordered by a court, the proper court to do so was the Subordinate Judge''s second court, Hooghly, and; not the Original Side of the High court. In my judgment, it is not necessary for us to decide for the purposes of this case whether the prayer for execution in the Original Side of this Court could have been successfully resisted by the surety. It has to be remembered that immediately after execution was sought against him, the surety informed the principal debtor, the Appellant, about the position and the principal debtor raised no objection about the excitability of the decree in the Original Side of this Court. He cannot now be allowed to resist the claim of the surety for reimbursement of the sums paid by him to the decree-holder as costs or the sum paid by himself to his Solicitors as remuneration on the ground that the prayer for execution might have been successfully resisted. The Indemnity Bond itself provides for payment by the Respondent of not only the sum payable under the Bond but the costs of any application, by them authorised by such Bond or the conditions respectively attached thereto and in particular all the costs as between solicitor and client of the Corporation relating to any application by them for the discharge of the said Bond and generally all (if any) loss, costs, charges, and expenses whatsoever which they may suffer, incur or be put to in consequence of their having issued the Bond. Even assuming for the sake of argument that the proper procedure for the decree-holder was to ask the Hooghly court for an order on the executant of the surety bond to pay the amount thereunder instead of seeking execution in the Original Side of the High Court. I do not see any reason to doubt that the amount over and above the sum of Rs. 18,767-9-3 pies which the Respondent company has had to pay was incurred by them in consequence of their having issued the bond. It cannot be suggested for a moment that they made the payments voluntarily nor is there any reason to think that if they had Desisted the decree holder''s prayer for execution of the bond and forced him to seek his relief in the Hooghly court, lesser costs would have been incurred. On a consideration of all these circumstances, I am of opinion that the Plaintiff is entitled to a money decree for not only the sum of Rs. 18,767-9-3 pies but for the full amount of Rs. 19,683-6-6 pies paid by the company in pursuance of the writ of attachment that was issued by the Original Side of the High Court together with the sum of Rs. 400 paid by them to their solicitors.

A prayer has been made before us on behalf of the Defendant for instalments. In consideration of the fact that there are some other claims for which the Receiver is liable, I think it proper to order the decretal amount to be paid in two equal instalments, the first instalment to be paid by the last day of the month of Raisakh of the year 1(sic)61 B.S. and the second instalment by the last date of the month of Baisakh of the year 1362 B.S. If the said first instalment is not paid in time, the entire amount will be considered to be in default. If any amount out of the said decretal amount has already been paid, the same will be credited towards the first instalment.

Subject to the variation in the form of the decree, the appeal is dismissed, but in the circumstances of the case there will be no order for costs.

Debabrata Mookerjee, J.

I agree.