Raj Kumar Bharthi and Another vs Surajdeo Sahi

Wort, Ag. C.J.

This matter was referred to a Division Bench as the point appeared to me at the time to be one of considerable importance and upon which there were a number of authorities which from one point of view might have been taken as conflicting. In the first place I want to make an observation with regard to the words appearing in the order I made while referring the case to a Divisional Court. I stated there as follows:

And if it can be held that there was no implied covenant to repay and that the plaintiff''s right to recover the principal depended upon Section 68, that is to say that he was entitled to that relief only in the circumstances that he had been dispossessed, it would mean that although there has been a loan, the creditor can never get repayment.

I had never intended laying down in that judgment that if there was implied agreement to repay, the plaintiffs would have the right u/s 68, T.P. Act, to recover the principal. In the judgment, which in this case I am about to express, it would appear that to decide that point is unnecessary. I have no doubt as to the proper meaning of Section 68, T.P. Act. The appellant was the usufructuary mortgagee who was in possession of the property as a security for the loan advanced. On the terms of the bond he was to repay himself, so far as interest was concerned, out of the rents and profits. I presume that the reason for that arrangement was that the rent and profits were insufficient to meet more than the interest, but the fact remains that the plaintiff was to recoup himself for the interest only from the rents and profits. Now, it stands to reason that, unless the mortgagee has a right either to sell the property or sue for the mortgage money, the mortgagor would, in the circumstances of the case, be entitled to keep the money so long as he pleases, indeed to keep it for such period as would bar the plaintiff''s (mortgagee''s) right to recover the same.

The only question that we have to decide in this case is whether the plaintiff-mortgagee is entitled to recover the mortgage money, because, for reasons best known to himself, he does not ask for a decree for the sale of the mortgaged property. The matter that falls to be determined is whether on the construction of the deed there is a covenant to repay the mortgage money. Before dealing with that point, I would refer to some of the Sections of the Transfer of Property Act. Section 58(d) provides:

Where the mortgagor delivers possession or expressly or by implication binds himself to deliver possession of the mortgaged property to the mortgagee, and authorizes him to retain such possession until payment of the mortgage money, and to receive the rents and profits accruing from the property, or any part of such rents and profits, and to appropriate the same in lieu of interest or in payment of the mortgage money, or partly in lieu of interest and partly in payment of the mortgage money, the transaction is called a usufructuary mortgage, etc.

There was an argument addressed to us during the course of the case which cast a doubt as to whether the document before us was a usufructuary mortgage. I think there can be no doubt about the matter from the definition clause of Section 58.

It is true that Kulwant Sahay, J. in Chhathi Lal Sah v. Bindeshwari Prasad AIR 1926 Pat. 605 same to the conclusion, in circumstances not dissimilar to those which we have before us, that the document was not a pure usufructuary mortgage. But it will be Been from a perusal of the judgment in that case that the learned Judge came to that conclusion presumably on the ground that there was no provision enabling the mortgagee to remain in possession after the due date a provision which seemed to the learned Judge deciding the case contrary to that in Clause (d) of Section 58 of the Act. Section 60 defines the rights and liabilities of mortgagor and no further reference need be made to its provisions excepting perhaps to the following clause:

Nothing in this Section shall be deemed to render invalid any provision to the effect that, if the time fixed for payment of the principal money has been allowed to pass, or no such time has been fixed, the mortgagee shall be entitled to reasonable notice before payment or tender of such money.

I quote this passage of the Section because it was suggested that the following clause in the deed,

when at the end of the month of Jeth 1336 Fasli or after the expiry of the due date at the end of the month of Jeth of any year, I, the exeoutant, shall repay the entire peshgi money in cash,

was a clause enabling or rather entitling the mortgagee to notice before repayment. If that is the proper construction to be placed, a provision is not contrary to the provisions of Section 60. Section 67 provides for a decree for the sale of the mortgaged property. The Proviso to the Section (Proviso a) reads:

Nothing in this Section shall be deemed to authorize any mortgagee other than...a usufructuary mortgagee as such to institute a suit for sale.

It is not a proper construction of that Section to say that a usufructuary mortgagee is excluded entirely from the operation of the Section. Again I refer to that merely by way of explanation of the judgment (to which I was a party) in Kirti Narayan Singh and Others Vs. Surendra Mohan Singh and Others, where certain words that I used might be construed as meaning that all usufructuary mortgages, in whatever circumstances, were excluded from the operation of the Section.

No more need, I think, be said with regard to the matter, because I have already intimated that the plaintiff does not ask for a decree for sale of the property mortgaged to him. I now come to Section 68 which provides:

The mortgagee has a right to sue for the mortgage money in the following cases and no other, namely: (a) where the mortgagor binds himself to repay the same

and Clauses (b) and (c) give the right to claim the mortgage money where either the property has been destroyed or security rendered insufficient or where the mortgagee is deprived of his security by default of the mortgagor. Neither of those Clauses (b) and (c) are relevant for the purpose of this case.

I now refer to the case in Ram Narain Singh v. Adhindra Nath AIR 1916 P.C. 119. There are certain observations in this case which have been relied upon either by one side or the other to which reference will be made later. But I suppose that the importance of the decision lies in the fact that Lord Parker who delivered the opinion of their Lordships of the Judicial Committee, laid down certain propositions which applied to many classes of cases other than the one with which they were dealing. Lord Parker in the course of his judgment stated:

In considering this question it must be borne in mind (i) that a loan prima facie involves such a personal liability; (ii) that such a liability is not displaced by the mere fact that security is given for the repayment of the loan with interest, but (iii) that the nature and terms of such security may negative any personal liability on the part of the borrower.

The learned Law Lord said (previous to the observation just quoted) the following:

The sole question which remained, therefore, was whether there was any personal liability on the part of the mortgagor for payment of that portion Of the loan and interest which remained unsatisfied out of the rents of the villages

and then the three considerations which I have stated were laid down. I would like to state that the third consideration, namely the nature and terms of such security may negative any personal liability on the part of the borrower, might apply in the case of certain usufructuary mortgagees. One of the usual terms of a usufructuary mortgage is that not only should the mortgagee have the mortgaged property as security for the mortgage money, but he should repay himself both as regards the interest and the principal out of the rents and profits. That would be, I imagine, a case in which the nature and terms of the security would negative the personal liability of the mortgagor.

Lord Parker was dealing with a case, as will be seen from the statement of facts at the commencement of the judgment, in which the mortgagee had gone into possession of a property as security for the mortgage money and he was to repay himself both as regards the interest and principal out of the rents and profits. Secondly, the mortgage deed upon which the plaintiff relied could not be used in evidence as it had not been attested, and their Lordships of the Judicial Committee referred the case back to the Appellate Court to try certain issues which arose under paras. 6 and 7 of the plaint. In paras. 6 and 7 of the plaint there were allegations which would raise issues coming under Clauses (b) and (c) of Section 68, T.P. Act, and on this (as I understand the judgment) Lord Parker stated that the personal liability which was involved in a loan was not displaced by the fact that security was given for the repayment of the loan with interest. It is also to be noted in this connexion that Lord Parker makes this observation:

The Board were of opinion that having regard to the nature of the deed of 11th April 1896, which was a usufructuary mortgage only, and to its terms, any personal liability on the part of the mortgagor was excluded; and that though the allegations of paras. 6 and 7 of the plaint might, if established, give rise to other rights of action, such rights could not be enforced in an action based substantially on a personal liability arising by implication from the terms of the deed itself.

It is in those circumstances that the matter went back for the Court to try the question whether the plaintiff had established any right under Clauses (b) and (c) of Section 68. Now, it seems to me that it is impossible, as was suggested in the course of the argument and as a basis for a claim, to apply the first principle laid down by Lord Parker to the facts of this case, the first principle being that the loan prima facie involves a personal liability. I think Lord Parker (if I may be allowed to say so) meant nothing more by that statement than if the facts were merely that a loan had been made, that a personal liability to repay the loan was involved. But when, as in this case, the relationship between the parties is one of mortgagor and mortgagee, we are, in my judgment, governed by the provisions of the Transfer of Property Act. I have said and repeat that the plain, tiff makes no claim in this Court under Clauses (b) and (c) for the reason that the Courts below held that he had not been dispossessed as he alleged in his plaint. He is therefore now limited to the first clause of Section 68, that is to say, whether the mortgagor binds himself to repay the loan. We have to see therefore whether in this case the mortgagor has bound himself to repay the loan. I am clearly of the opinion, whatever rights the usufructuary mortgagee may have, that u/s 68 the words, which I have just read, on their proper meaning, refer to an express contract in contradistinction to a contract implied by law. The words in the deed which have created difficulty in this case are:

He should pay the aforesaid annual malikana rent in full to the proprietors of the village every year till the repayment of the said peshgi money on taking receipts from them in the name of me, the executant, through himself. When at the end of the month of Jeth 1336 Pasli or after the expiry of the due date at the end of the month of Jeth of any year, I, the executant shall repay the entire peshgi money in cash in one lump sum at one time to the aforesaid zarpeshgidar, I shall take back this deed and enter into possession of the ijara property.

Then the deed provides that the executant

shall not put forth any application directly or indirectly to redeem the rehan without making payment of the entire and full amount of peshgi.

At p. 74 of the same volume of the Patna Law Times to which I have already refer, red, viz. Chhathi Lal Sah v. Bideshwari Prasad A.I.R 19826 Pat. 605, there is a decision of Das, J. as he then was, in Kamal Nayan Prasad v. Ram Nayan Prasad AIR 1930 Pat. 152. The question which fell for decision in that case was the same as the one before us. Das, J. had to decide whether the following words of the mortgage were an undertaking by the mortgagor to repay the mortgage money:

I shall take back this patta in the last month of Bhado 1321 Fasli after paying off the entire zar-peshgi money in one lump sum to the thikadars and take back possession of the lease-hold property.

What this Court would have decided had a clause of that description been before it is needless to speculate. Das, J. held that that clause together with the following clause,

In case the zarpeshgi money be not paid in due time by the executant in one lump sum, then this patta will remain in force, etc,

did not constitute a covenant by which the mortgagor bound himself to repay the mortgage money. It is not very profitable to attempt to construe a document by reference to authorities; the words of each document must be taken, and the Court must ascertain, as best it can, what the intention of the parties was in accordance with the terms as expressed by them. That is the task before us in this case. Now the argument advanced by Mr. Yunus on behalf of the respondent is that the clause to which I have referred is merely a clause which provides for what usually happens to the mortgaged property when the mortgagor repays the mortgage money. If that is the construction to be placed upon it, it is quite clear that the only possible right that the mortgagee would have would be to bring the property to sale, if such a right exists.

I have expressly omitted deciding that question. But apart from other considerations it would be quite clear, upon the construction sought to be placed upon the words I have quoted that the mortgagee would have a right to recover the mortgage money. The document must be read as a whole. In the earlier part of the document, it is stated that the period for which the loan was granted is "five years commencing from 1332 to 1336".

First, therefore, we see that the parties fixed the period for which the loan was granted. The absence of the word ''when'' in the second sentence of the passage which I have cited from the deed, would leave no doubt as to the construction of the clause which would read as follows:-''at the end of the month of Jeth or after the expiry of the due date I, the executant, shall repay, etc''. This to me quite clearly appears to be a clause by which the mortgagor undertook to repay the mortgage money, and the provision of what would happen upon repayment would not detract from that construction. The question is, therefore, whether the word when'' makes any difference in the circumstances. If the sentence is put in another form or para, phrased I shall repay the entire peshgi money in cash in one lump sum at the end of Jeth 1336 Fasli or after the expiry of the due date at the end of the month of Jeth of any year'' it would be capable of one construction only, namely that the mortgagor had undertaken to repay on that day and then certain things would happen and he would have certain rights such as the return of the property. I can not see that the arrangement of the sentence as we find it in the official translation makes any difference and in my judgment the expression:

When at the end of the month of Jeth 1336 Fasli or after the expiry of the due date.... I, the executant, shall repay the entire peshgi money is an undertaking to repay the mortgage money.

It would seem impossible to put any other construction on it. That view being taken, the mortgagee comes within the provisions'' Section 68, T.P. Act, and is entitled to a decree for the mortgage money.

A large number of cases was discussed during the course of the argument, including the well-known decision in Narsingh Partap v. Mohammad Yaqub AIR 1929 P.C. 139. The question there before their Lordships of the Judicial Committee was whether the document before them constituted an anomalous mortgage or not and it seems to me to be an authority which is of no assistance to us in arriving at a conclusion in the present case.

I have said and repeat that the only point in this case is whether there was a contract or obligation to repay the mortgage money. I am clearly of the opinion that there was. This being so, the plaintiff is entitled to succeed and he is entitled to succeed in this Court.

The appeal, therefore, is allowed with costs.

Manohar Lall, J.

I agree, but I wish to add a few words. The question which falls to be determined in such cases has to be decided upon the construction of the particular zarpeshgi deed: see Damodara Shanbhogue v. Chandapur Pujary AIR 1933 Mad. 613 always keeping in view, as pointed out by Lord Parker in Ram Narain Singh v. Adhindra Nath AIR 1916 P.C. 119:

That a loan prima facie Involves such a personal liability; that such a liability is not displaced by the mere fact that the security is given for the repayment of the loan with interest; but that the nature and terms of such security may negative any personal liability on the part of the borrower.

When I apply these considerations to the bond in question, I have no hesitation in coming to the conclusion that in this case the mortgagor clearly took upon himself the liability to repay the loan, or in other words, to use the language of Section 68,(a), Surajdeo Sahi bound himself to repay the mortgage money on the expiration of Jeth 1336 Fasli. The words "due date" are to be found in the clause which begins thus:

When at the end of the month of Jeth 1336 Fasli or after the expiry of the due date at the end of the month, etc.

I am also impressed by the fact that the zarpeshgi bond was in lieu of interest only and no provision whatever was made in this document for the repayment of the principal unlike the document in Ram Narain Singh v. Adhindra Nath AIR 1916 P.C. 119 (cited supra). The Subject-matter of the zarpeshgi was a small piece of land measuring 1 bigha 14 kathas and 3 dhurs which bore an annual rental of Rs. 5-6-0 which had to be paid by the mortgagee to the superior landlord, and the interest on the amount advanced was stated to be Rs. 36 a year.

It is therefore obvious that the parties never contemplated that the mortgagee will ever be able to pay himself by remaining in possession of the land. Again there is no condition in the document that after the expiry of the "due date" the mortgagee will remain in possession on the same terms as he had to remain in possession during the term of five years for which the document was to run although such a term may well be implied in law.

At this stage reference may be made to the decision in Roy Gouree Sunkur v. Baboo Bholee Pershad (1872) 17 W.R. 211 where the learned Judge of the Calcutta High Court pointed out that the words in the document (which were somewhat similar except that instead of the word ''when'' it was stipulated "that after the expiry of the term it will be competent to me") relied upon by the appellant only debarred him from re-entering in the middle of any year in the event of the respondent''s occupation continuing after the specified term owing to the default of the appellant to pay off the loan, not that there was any undertaking by the respondent to hold on until it suited the mortgagor to pay off the mortgagee. Applying this to the facts of this case I hold that on a true construction of the zarpeshgi deed the appellant gave no undertaking that he would continue in possession until it suited the mortgagor to pay him.

I wish to deal very shortly with some of the cases of this Court and of the Calcutta High Court which were cited before us. The case in Jag Sahu v. Mt. Ram Sakhi Kuer A.I.R.1922 Pat. 167 is a case which is directly in favour of the view that in the case of a zarpeshgi of the kind we have before us the mortgagee has a right to sue immediately after the "due date" is over, irrespective of whether the mortgagee remains in possession of the property after that date.

Das, J. in Kamal Nayan Prasad v. Ram Nayan Prasad A.I.R.1930 Pat. 152 sought to distinguish this case on the ground that Coutts, J. in Jag Sahu v. Mt. Ram Sakhi Kure A.I.R.1922 Pat. 167 had found that the usufructuary mortgagees had been dispossessed of the disputed land by the mortgagors. With great respect to the learned Judge, I think, that there was an error, because Coutts, J. says definitely that in the case before him the finding of fact of the lower Appellate Court was that the plaintiff had not been dispossessed, and indeed in noticing the third argument advanced by the appellant before him Coutts, J. says as follows:

The third point urged is, that a due date having been fixed for payment of the mortgage money under the deed of 21st September 1905, the mortgage was not a pure usufructuary mortgage, and therefore the plaintiffs were entitled to sell immediately after the due date was passed, even though he still remained in possession of the property.

The actual decision of Das, J. in Kamal Nayan Prasad v. Ram Nayan Prasad A.I.R.1930 Pat. 152 may be justified upon the view that the construction placed upon the document in that case was based upon (as the learned Judge says himself) the following important passage which occurs towards the end of the document:

In case the zarpeshgi money be not paid in due time by the executant in one lump sum, then this patta will remain in force and intact till the repayment of the zarpeshgi money with all conditions set forth therein.

This means to my mind that the parties contemplated that on the expiry of the due date if the money had not been paid by the mortgagor, the result would be exactly as if a new zarpeshgi had been executed on the same terms as before. I need not discuss at any great length the case in Luchmeshar Singh v. Dookh Mochan Jha (1897) 24 Cal. 677 a case which depended upon its own facts, namely upon the construction of the terms of the zarpeshgi in question and in which the learned Judges held that they could not find a covenant to pay therein. It may be noticed that the case reported in Luchmeshar Singh v. Dookh Mochan Jha (1897) 24 Cal. 677 did not consider the tests laid down by Lord Parker in Ram Narain Singh v. Adhindra Nath A.I.R.1916 P.C. 119. Their Lordships of the Judicial Committee have laid down in a large number of cases that it is worse than useless to construe the terms of one will from the terms of another.

I venture to adopt the same remark by saying that it would be an unprofitable task to construe the words of one document from those of another. The case in Chhathi Lal Sah v. Bindeshwari Prasad A.I.R.1926 Pat. 605 was decided on the ground that there was no provision in the bond that after the expiry of the term of three years the mortgagee would be entitled to retain possession of the mortgaged property until the repayment of the mortgage amount: in other words, Kulwant Sahay, J. relying upon the remarks of Lord Parker in Ram Narani Singh v. Adhindra NathA.I.R. 1916 P.C. 119 construed the terms of the bond as not negativing the implied covenant to repay the money at the end of the "due date."

For these reasons I am in entire agreement with the judgment just delivered by my Lord the Chief Justice.