Rachpal Maharaj vs Bhagwandas Daruka and Others

Reuben, J.—This is an appeal by defendant 1 Rachpal Maharaj againat a decree for sale on the foot of an equitable mortgage.

The plaintiffs-respondents carry on business in Calcutta under the name of Thanmal Chunilal. They sued on the allegation that the defendants form a joint family carrying on a joint family business and governed by the Mitakshara law, with the defendant-appellant as its karta, and have been carrying on monetary transactions for a long time with the plaintiffs. They allege that the equitable mortgage was created by defendant 1 by the deposit of the title deeds in Calcutta on 23-10-1936, as security for the amount found due on the transactions between the parties up to date and for the transactions to be entered into in future. The documents are set out in Schedule 2 to the plaint and the property cove, red thereby is given in Schedule 1. The claim was for Rs. 10,322-2-6 with interest at nine annas per hundred rupees per month compoundable with yearly rests. The main defence set up by defendant-appellant was, firstly, that there was no equitable mortgage as alleged, and that the deeds in question were made over to the plaintiffs at Darbhanga not as security for transactions between the parties but merely for the purpose of safe custody, as a misunderstanding had arisen between defendant 1 and the other defendants and he was afraid that the other defendants might deprive him of these documents; Secondly, that, on transactions between the par ties, the defendants were the creditors and not the debtors of the plaintiffs, and, thirdly, that there was no stipulation regarding the payment of interest, compound or simple. All these contentions were negatived by the subordinate Judge, and he decreed the suit accordingly, allowing interest at six per cent, per annum pendente lite future interest at the same rate. On the creation of the equitable mortgage by the deposit of the title deeds in Calcutta, the plaintiffs have adduced evidence, which the Subordinate Judge has rightly characterised as unimpeachable, and the correctness of his finding of facts on this point has not been challenged before us. Only three contentions were pressed firstly, that the suit must fail because the contract between the parties was reduced to writing in the shape of a document (Ex. 3), which must be excluded from evidence under the provisions of Sections 17 and 49, Registration Act and itself excludes oral evidence of the contract under the provisions of Section 91, Evidence Act; secondly, that the plaintiffs are not entitled to any interest previous to the filing of the suit; and thirdly, that the Subordinate Judge was wrong in accepting as genuine the alleged signatures of the appellant on the account books of the plaintiffs and should have reopened the account between the parties.

The document (EX. 3) is a letter dated 23-10-1936, addressed to Messrs. Thanmal Chunilal and signed by the defendant-appellant on behalf of the defendants'' firm Bamraehpal Surajmal. It was signed and made over to the plaintiffs on the very day when the title deeds were deposited with them by way of security. Its is as follows:

We write to put on record that to secure the repay merit of the money already due to you from us on account of the business transaction between yourselves and ourselves and the money that may hereafter become due on account of such transactions we have this day deposited with you the following title deeds in Calcutta at your place of business at No. 7, Sambha Mulliek Lane relating to our properties at Samastipur with intent to create an equitable mortgage on the said properties to secure all monies including interest that may be found due and payable by us to you on account of the said transactions.

Then follows a list of the property referred to. It is contended that this document constitutes the bargain between the parties and, therefore, was compulsorily registrable under the provisions of Section 17, Registration Act.

The law regarding documents passing between parties in connection with transactions of this kind has been considered in a large number of reported decisions and was laid down, as long ago as 1878, by Couch, G.J. in terms which have been repeatedly approved and followed. In Meer Mahomed Kazen Jowhurry v. Khetoo Debee (73) 20 W.R. 150.

The rule with regard to writings is that Oral proof cannot be substituted for the written evidence of any'' contract which the parties have put in to writing. And the reason is that the writing is tacitly considered by the parties themselves as the only repository and the appropriate evidence of their agreement. If this memorandum was of such a nature that it could be treated as the contract for the mortgage, and what the parties considered to be the only repository and appropriate evidence of their agreement, it would be the instrument, by which the equitable mortgage was created and would come within Section 17, Registration Act.

The document in that case was a promissory note whereby the mortgagor promised to repay "the sum of Rs. 1200, with interest at the rate of 21 per cent, per annum for value received in cash,

and there was an endorsement:

For the repayment of the loan of Rs. 1200/-, and the interest due thereon of the within note of hand, I hereby deposit with Baboo Sham Lall Khettry as a collateral security by way of equitable mortgage title-deeds of my property situate at No. 11 in Fuckeer Chand Mitter''s street at Mirzapore in Calcutta.

Their Lordships were of the opinion that the promissory note was given either at the same time as the deposit of the title deeds was made or some hours after it in pursuance of an understanding between the parties. Nevertheless, on a consideration of the facts, they held that it was not a contract for the mortgage but was nothing more than a statement by the mortgagor admitting that he had deposited the deeds on the advance of the money for which the promissory note was given.

Our attention has been drawn to several cases in which the document in question was held to constitute the bargain between the parties and, consequently, to require registration. The test applied in Subramanian v. Lutchman AIR 1923 P.C. 50 was whether the document constituted the bargain between the parties or was merely the record of an already completed transaction. It was a memorandum signed and delivered to the plaintiff on the occasion of the deposit of the title deeds. In holding that it constituted the bargain, their Lordships stressed the following words appearing on it:

We hand herewith title deeds, etc.... This please hold as security, etc,.... Please also hold this as further security.

Clearly the document was the instrument by which the deposit was made. In AIR 1939 167 (Privy Council) , the memorandum was a formal and elaborate document not only containing all the terms on which the moneys were advanced but expressly conferring a power of sale. It contained a parenthetical passage stating that the title deeds had been previously delivered with intent to create a security, but their Lordships thought that this did not alter the character of the memorandum itself, which if the parenthetical passage was disregarded, was an instrument effective to create an interest in the property in favour of the mortgagees. The reason was that the memorandum did not merely evidence an already completed transaction but was couched in an operative language. It was contractual in form and embodied an agreement that the title deeds in question were to be held as security for the advances made and it spoke of the moneys "hereby secured". In Bhairab Chandra v. Anath Nath De AIR 1920 Cal. 312, the title deeds were already in the custody of the plaintiff having been deposited as security for a previous loan. At the time of taking a subsequent loan for Rs. 1500, the defendant gave the plaintiff a letter which ran as follows:

Dear sir, for repayment of the sum of Rs. 1500/- with interest I have borrowed from you on a promissory note of date, I hereby put on'' record that the title deeds re my premises No. 1, Garpar Road, already deposited with you, shall be held as colltaeral security.

The words placed in italics by me are clearly operative. The documents being already in the custody of the plaintiff formal redeposit of the documents was necessary in order to complete the transaction, and this formal redeposit was made by these words. In coming to their decision, their Lordships pointed out that the case was similar to that In Dwarka That v. Sarat Kumari (71) 7 Ben. L.R. 55, in which the deeds were sent from the defendant to the plaintiff''s attorneys with a letter, which stated:

I have the pleasure of handing to you the title deeds of a house No. 56, Lower Circular Road, as a collateral. security for the Rs. 20,000, which falls due this day. Please accept them from my Manager.

It was also similar to Ebrahim Hazi Ismail (since deceased, represented by Bai Fatma Bai) and Others Vs. Official Trustee and Another, , in which the memorandum stated:

As collateral security for the due repayment of the loan of Es. 1,25,000 (one lac twenty-five thousand rupees) which you have this day lent and advanced to me on my Hundi of to-day''s date.... I herewith deposit with you my principal title-deeds etc.... I hereby also undertake to deposit with you in Calcutta the other title-deeds etc.... I further place on record that interest will run on the amount of the said Hundi at the rate of Rs. 8, 000 (three thousand rupees) per month from and after the expiry of 90 days from the date until realisation.

If we examine Ex. 3 in the light of the above decisions, we will find in it no provision which can be described as an operative provision. On the face of it, it merely records a transaction which has taken place between the parties and creates evidence of the circumstances in which, the title deeds were deposited with the plaintiffs. The case seems to be on a par with (P.C) AIR 1931 36 (Privy Council) , where, before the plaintiff''s arrival on the scene, the Manager had already banded over to the plaintiff''s son two documents which he had written out and signed namely: (1) A promissory note for Rs. 60,000 payable on demand with interest at 1 per cent, per mensem and (2) a memorandum which consisted of a list of the title deeds, with the following introductory words:

Written to E.N.A Samoo Battar by Krishnaswami Ayyar, of S.V. Bamasami Ayyar and Brothers, As agreed upon in person I have delivered to you the undermentioned documents as security

Upon the arrival of the plaintiff, the deeds were examined to see whether they were in order, and, on being found to be so, the deeds, the pro. missory note and the memorandum were put away in the plaintiff''s safe, and the loan was advanced by the plaintiff on the security thus created. The test laid down by their Lordships was that, to bring a memorandum relating to deposit of title deeds within Section 17, Registration Act, it must, on its face, embody the terms. of the transaction and be 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, but it is not necessary that it should embody all the particulars of the transaction of which the deposit forms a part. Our attention has been drawn to the evidence relating to the signing and making over of the memorandum (Ex. 3) in an attempt to establish that it was signed and made over to the plaintiffs'' firm before the deeds of title were made over. Plaintiffs'' witness Hira Lal stated:

After the lekha parhi Rachpal Maharaj gave certain documents to Parmanand Babu. The papers were given to him for the purpose of keeping them in respect of the dues. At about 4 p.m. Bachhpal Maharaj came to Parmanand Babu and delivered to him this paper (Ex. 8).... Parmanand Babu then asked him to sign the paper. He put his signature then.... There was no other lekha Parhi than this paper Ex. 3 at that time.

This evidence is not at all clear on the point as to whether the documents were made over before or after the signing and making over of exhibit 3. Lekha parhi, to which the witness referred in his earlier statement, may be the drafting and typing of the memorandum. It may not include the signing, which might have come Some what later. The only definite statement, which the witness makes on the point, occurs in his cross-examination, where he states that the delivery of the documents and the signature on exhibit 3 were made at the same time. The point, however, is not of much importance. The question really is what was the intention of the parties in executing that document, was the document intended to be an operative document and to constitue any part of the bargain between the parties? As was held (P.C) in AIR 1931 36 (Privy Council) , the mere fact that it was signed and made over before the transaction between the parties was completed would not make it an operative document. On these considerations, I am satisfied that exhibit 3 is merely a memorandum regarding the fact of the deposit of the documents, and that it does not exclude oral evidence of the mortgage agreement. This point must, therefore, be decided against the appellant.

On the point of interest, it is contended that the claim in the plaint is based on a stipulated rate of interest, and that the evidence does not make out such a rate of interest. It is urged that the Subordinate Judge wrongly allowed interest at the commercial rate prevailing at the time of the transaction. The allegation in the plaint is that it was stipulated between the parties ''that interest should be paid "at the rate of 9 annas per hundred rupees'' per. month according to mahajani system." In evidence, Parmanand Daruka (p.w. 2) deposed:" The commercial rate of interest is 9 annas p.c. per mensem compoundable every year." This statement was clearly made in direct reference to the pleading in the plaint that interest was payable according to mahajani system, and, it is in reference to this, that the Court found that the commercial rate of interest was as stated.

It is, therefore, not correct to say that the interest granted by the Court is not in accordance with the pleading in the plaint. As regards the correctness of this rate of interest, the Subordinate Judge has rightly accepted the statement of the witness because it was not challenged by any cross-examination on the point, and no evidence to the contrary has been given by the defence. The body of the plaint is somewhat vague as to whether the interest chargeable is simple interest or compound, interest, but the point is made clear by a reference to the calculation of interest on which the claim is based, which calculation, as is stated in the last sentence of para. 4 of the plaint, is made at the stipulated rate of interest. Through some strange mistake, the Subordinate Judge in his judgment has described the interest chargeable as nine per cent, per annum instead of at nine annas percent per month, which is equivalent to 6� per cent, per annum. This has not affected the correctness of the decree, however, as the amount decreed has been calculated at the correct rate, namely 6� per cent. Per annum, compoundable with annual rests. On the above ground this point must also be decided against the appellant.

This brings us to the third point, namely, the correctness of the amount claimed as due. In order to prove this, the plaintiffs have filed a complete set of account, papers extending over a period of about ten years. Supported by the oral evidence of Parmanand Daruka (P.W. 2) and witnesses Mangi Lal Sharaf and Hira Lal, both. employees of the plaintiffs'' firm, who were examined on commission, these papers show that, on three occasions, the accounts between the parties were made up, and, on each occasion, Rachpal Maharaj signed in the books of the plaintiffs'' firm in acknowledgment of the correct" ness of the result arrived at. His signatures in token of acknowledgment are Ex. 2 series. The last such acknowledgment, dated Phagun Badi 10, sambat 1997 says "After comparison of account Rs. 10,891-2-3 (rupees ten thousand eight hundred/and ninety-one, annas two and pies three only) remained due and payable up to Katik Badi 15, sambat 1997." It is urged that the Subordinate Judge should not have accepted the signatures of Rachpal to have been proved by this evidence but should have insisted upon the examination of a handwriting expert for this purpose. This was not a case, however, where the plaintiffs relied only upon the acknowledgment of the appellant. In order to prove their dues, the plaintiffs produced direct evidence to establish what amount was due to them. The finding at which the Subordinate Judge arrived is not based merely on the acknowledgment as such. What he says is that the accounts put in by the plaintiffs together with the evidence of the three plaintiffs'' witnesses establish the correctness of the plaintiffs'' claim. It is in the light of this evidence that he considered the genuineness of the defendants'' signatures and refused to accept his denial of these signatures. Besides that, the defendant did not impress him as a truthful witness. He rightly commented on the fact that, although the defendant maintains accounts and admits that his accounts for the last 12 years are in existence, he did not produce the accounts in Court. Here, again, it is urged that the Subordinate Judge was wrong in drawing an inference against the defendant from the non-production of these accounts, Mohan Bikram Shah v. Deonarain Mahto and AIR 1945 Pat. 453, is cited as an authority that such an adverse inference should only be drawn if the party, being called on to produce papers, fails to do so. That case is not an authority for such a broad proposition. The contention there was that the papers which had not been produced were irrelevant for the purposes of the plaintiff and, therefore, it was not necessary for the plaintiff to produce them and an adverse inference ought to be drawn only if the failure had occurred after being called on to pro-duce them. In the present case, where the defendants were not only denying the correctness of the claim of the plaintiffs but went so far as to assert that, on the contrary, it was the plaintiffs who owed them money, the account books of the defendant firm were very relevant documents, and the Court was right in attaching great significance to their failure to put these documents into evidence. I see no reason whatever to doubt the correctness of the accounts as shown in the papers of the plaintiffs and would decide this point also against the appellant.

This disposes of the contentions of the appellants. Mr. S.N. Banerji, appearing for minor respondents 7 to 13, raises a new point on their behalf, namely that, in the absence of poof of legal necessity, they cannot be Madelia He under the decree. He refers to para. 5 of the written statement filed on behalf of these minor respondents, in which this plea is set out. In spite of the plea having been taken in the written statement, however, no issue was framed on the point, and, although the minors were represented at the hearing of the suit, no reference was made to it. It must be taken, therefore, that the point was given up, and, as it involves a question of fact, they cannot be allowed to raise it at the appellate stage. On the above grounds, I would dismiss this appeal with costs to the plaintiffs-respondents.

Shearer, J.

I agree.