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Judgment
410 paragraphs · 9,312 wordsMadhavan Nair, J.—This is an appeal by defendants 1 and 5 against the decree of the Subordinate Judge of Trichinopoly in O.S. No. 1 of
1929.
The plaintiff in the suit is H.H. The Maharatta Thakore Sahib of Limbdi. In the appeal the question is raised as to whether the plaintiff is entitled
to a sale of the suit properties in enforcement of an alleged sub-mortgage of an equitable mortgage by deposit of title-deeds, granted to him by the
third defendant of the suit properties. These, called the Vadavoor lands, are situate in the Trichinopoly District. These and various other properties
situated in Madras and Bangalore belonged to Messrs. Tawker & Sons, a well-known firm of jewellers in Madras. They mortgaged the title-deeds
of all these properties to Messrs. Nagarseth & Sons, the third defendant in the present suit, in 1916 for a sum of over 18 lakhs of rupees
borrowed from time to time for carrying on their family business. Exs. M, M-1 and M-2 are the documents which were deposited as the title-
deeds of the properties. Of these Ex. M is only a judgment and, strictly speaking, is not a title-deed. In August, 1922, Nagarseth instituted C.S.
No. 3772 of 1922 in the Bombay High Court (Ex. D-4 being the plaint) against Messrs. Tawker & Sons(who were defendants 1, 2 and 3), for
the enforcement of the equitable mortgage. This suit was not finally decreed till 1928. Meanwhile, on the 17th January, 1925, Messrs. Tawker &
Sons were adjudicated insolvents and the Official Assignee of Madras was made a party in that suit as the fourth defendant. In the course of the
suit the present plaintiff was also made a party as the fifth defendant at the instance of the plaintiffs in that suit (the present third defendant) - see Ex.
J dated 17th April, 1925--on the ground that they had made an ""equitable sub-mortgage"" in his favour of the title-deeds of the immovable
properties situate at Madras, Trichinopoly and Bangalore mortgaged to them. He then lodged what is called a counter-claim against Nagarseth &
Sons for Rs. 18,23,517-6-3 which he averred was secured by deposit with him of the title-deeds mentioned in the plaint and he prayed that the
properties covered by the title-deeds be sold and the proceeds applied in satisfaction of his debt. See Ex. N. It may be mentioned here that the
third defendant used to obtain moneys from the present plaintiff for lending them to the Tawkers. The present defendants 1 and 2, the latter
representing the P.M.A. Estate as receivers, claiming right to the Vadavoor properties involved in the present suit as purchasers of the same in the
course of execution proceedings in C.S. No. 196 of 1921 on the file of the High Court of Judicature at Madras, applied on the 12th April, 1928,
to be made parties in C.S. No. 3772 of 1922. Thereupon the present plaintiff and the third defendant (fifth defendant and plaintiffs in S the
Bombay suit) agreed to omit from that suit their claim to I the Vadavoor lands, the present suit properties, and to bring a suit for the same within
three months in Madras. In the circumstances, the learned Judge declared that he made no order on the application (see Ex. O, dated the 18th
June, 1928); and defendants 1 and 2 were not made parties to the suit. The learned Judge stated in Ex. O that the plaintiff and the fifth defendant
(that is, the Nagarseths and the present plaintiff) agreed to omit from their suit their claim as regards theVadavoorvillage and to file a suit within
three months ''inter alia against the applicants) that is, defendants land 2) to enforce their claim against the said Vadavoor village in the Court of
local jurisdiction''. In July, 1926, shortly after his appearance in the suit, an interim decree was passed by consent as between the Nagarseths and
the present plaintiff. That decree (see Ex. L) directed the Nagarseths to pay him the sum of Rs. 19,26,232. No relief was granted with respect to
the submortgage, but it was decalred that:
This decree is without prejudice to the rights of the 5th defendant (the present plaintiff)to take proceedings on the equitable mortgage of the
properties in the Madras Presidency and to prove his claim in the insolvency against the estate of the first, 2nd and 3rd defendants (the Tawkers).
Ex. L-1 is the copy of the amended decree passed in the Bombay suit on the 5th November, 1928 and in it the direction contained in Ex. O
was repeated. It declared that for the amount due by Tawker & Sons to the Nagarseths, namely, Rs. 15,37,243, the Nagarseths were entitled to
an equitable mortgage and a first charge on the lands comprised in the title-deeds with the exception of the lands in the Vadavoor village (the
present suit properties) and it was declared that by virtue of the deposit of the title-deeds by the Nagarseths with the 5th defendant, the Rajah of
Limbdi, the properties were validly mortgaged to the latter for the Nagarseths'' debt to him which had been already fixed at Rs. 19,26,232 by the
previous consent decree; and lastly it was declared that in default of payment by the Nagarseths to the Rajah he would be entitled to a decree
absolute for sale but without prejudice to his own and Nagarseths'' rights:
To institute a suit (that is, the right of the plaintiffs and the 5th defendant) against S. Rm. M. Rm. Ramanathan Chettiar and Messrs. Fraser & Ross,
Receivers of the P.M.A. Estate of Madras (the present 1st and 2nd defendants) to enforce their respective rights under the said mortgage as
provided by the previous order of the 18th June. (Ex. O.)
Ten days after the decree in the Bombay High Court, the present plaintiff made an application in this Court sitting in insolvency for permission to
buy all the mortgaged properties at a valuation of ten lakhs of rupees, agreeing to give credit for this sum in the mortgage decree and declaring his
willingness to rank as an unsecured creditor for the balance of the amount. (See Ex. VI.) The Court thereupon authorised the Official Assignee
who was seized of the estate of Messrs. Tawker, to execute a sale deed in favour of the plaintiff conveying all the properties. (See Ex. P dated
19th November, 1928.) The conveyance by the Official Assignee to the plaintiff of the entire mortgage properties including the present suit
properties was made on the 17th April, 1929, under Exhibit Q.
In pursuance of his undertaking, see Ex. (O) the suit out of which this appeal arises was instituted by the plaintiff on the 8th December, 1928, for
a declaration that he is the absolute owner of the plaint mentioned properties and that he is entitled to be in possession thereof. (See paragraphs 15
and 18(a) of the plaint.) In Clause (d) of paragraph 18 he prayed that if the Court should decide that defendants 1 and 2 had any right to redeem
or otherwise the suit properties in respect of the mortgage in favour of the 3rd defendant and the plaintiff, it may determine and give proper
directions ""in respect of the working out of the relative rights of the respective parties.
As will be presently mentioned, the plaint was allowed to be amended by order of the Court dated 12th November, 1930 (I.A. No. 1215 of
1930).
We will now briefly refer to the rights alleged by the defendants 1 and 5 to the suit properties and their contentions with regard to the rights
claimed by the plaintiff. Records show that the 1st defendant and P.M.A. (now represented by the 2nd defendant) had obtained a decree
(preliminary decree dated 26th April, 1922, decree absolute for sale dated 18th July, 1922) in C.S. No. 196 of 1921 against Messrs. Tawker &
Sons for moneys advanced to them on a mortgage of certain properties not involved in the present suit and an order for sale had been made by the
Court. During the course of execution proceedings the Official Assignee of Madras was made a party on the 16th February, 1925. As Tawker
&Sons were not able to pay the amount in time they applied for postponement of sale and obtained an extension of time for payment by giving by
way of additional security the present suit properties and charging the same with the payment of the amount due under the decree. The Court
extended the time making the present suit properties also liable for the decree amount if it was not paid in time. (See Ex. XIX dated 23rd July,
1923.) As the amount was not paid the suit properties were auctioned and purchased by the 1st defendant and P.M.A. in 1925. The sale was
confirmed (see Ex. XX dated 31st March, 1926) and a sale certificate was issued in their favour on the 12th May, 1926. (Ex. XX-a.) On the 12th
April, 1926, as already stated, they applied to be brought on record in the Bombay suit. It may be mentioned here that in O.S. No. 762 of 1926,
the partition suit in the P.M.A. family, Messrs. Fraser & Ross, the present 2nd defendant, were appointed receivers and hence they have been
made a party to the present suit. The 5th defendant having become entitled by purchase to the interest of the P.M.A. estate in the suit properties on
23rd January, 1930, was also made a party to the suit on 25th September, 1930. The 4th defendant to the suit is the Official Assignee of Madras.
In their written statements defendants 1 and 5, claiming right to the properties in the manner indicated above denied the equitable mortgage and
the sub-mortgage alleged by the plaintiff and their validity and contended that these were not binding on them. They also contended that the alleged
mortgages even if true and valid were not binding on the entire extent of the suit properties. It was also contended by them that the suit was not
maintainable and was barred by limitation and also under Order 2, Rule 2, Civil Procedure Code. The other contentions raised by them are not
material for this appeal.
As many as 19 issues were raised in the case but in the appeal the appellants question the findings of the lower Court only with respect to six
issues, these being issues 1, 2, 8, 9, 10 and 11. Generally stated, issues 6, 7 and 17 raised the question whether the sale to the plaintiff of the suit
properties by the Official Assignee of Madras the 4th defendant, on which a decree for possession is asked for by the plaintiff, (see paragraph 15
of the plaint) is valid and binding and to what extent it will prevail against the sale in favour of defendants 1 and 2. On this point the lower Court
recorded a finding against the plaintiff holding that the Official Assignee had no right to any of the plaint properties on the date of the sale by him
and though he sold all of them to the plaintiff, the plaintiff can have no title to them. This finding has not been appealed against by the respondent
and his learned Counsel has not pressed that claim in this appeal; and so, the only claim of the plaintiff to the suit properties that we are called upon
to consider is that which is based on the alleged sub-mortgage of the equitable mortgage in his favour. This forms the subject-matter of issue 8.
Issues 1, 2, 8, 9, 10 and 11 referred to above are as follows:
Issue 1 : Whether the plaint mentioned equitable mortgage in favour of 3rd defendant is true and valid in respect of the plaint mentioned properties
and is binding on defendants 1 and 2 and 5 to any and to what extent.
Issue 2 : Whether the plaint mentioned in sub-mortgage in favour of plaintiff is true and valid.
Issue 8 : If not (if the plaintiff''s sale referred to in issue 7 is not valid), is the plaintiff entitled to enforce his claim, if any, under the plaint mentioned
equitable mortgage to any and what extent against the plaint mentioned properties in the hands of defendants 1 and 2?
Issue 9 : Is the claim set up in issue 8 in time?
Issue 10 : Is the claim set up in suit barred by Order 2, Rule 2, C.P.C., by reason of the filing of C.S. No. 3772 of 1922 of the Bombay High
Court?
Issue 11 : Is the suit as framed not maintainable?
On the above issues the learned Subordinate Judge recorded findings in favour of the plaintiff and passed in his favour the decree now
appealed against by defendants 1 and 5. Under this decree the plaintiff was held entitled to get a sum of Rs. 1,25,062-4-6 for principal and interest
up to the 30th April, 1932 and costs and it was declared that if the amount was not paid in the time fixed by Court the suit properties should be
sold.
The issues were framed on 8th November, 1929, but before the case was actually taken up for trial the plaintiff filed in August 1930 I.A. No.
1215 of 1930 for amending his plaint. In paragraph 15 of the plaint the plaintiff stated that:
He is entitled to a declaration that he is the absolute owner of the plaint schedule properties and is also entitled to be put in possession thereof
the right being based on the purchase of the property from the 4th defendant the Official Assignee. Accordingly the 1st relief claimed in his plaint
(see paragraph 18-A) is for a declaration that he is the full owner of the plaint-schedule lands. The equitable mortgage in favour of the 3rd
defendant by Tawker & Sons and of the sub-mortgage by the latter in his favour were mentioned by the plaintiff in paragraph 3 of the plaint. In
paragraph 13 he asserted his own rights as well as the rights of the 3rd defendant to the suit properties based on their respective mortgages as
against the claim of the 1st and the 2nd defendants, and in Clause (d) of paragraph 18 he prayed the Court to give directions in respect of the
working out of the relative rights of the respective parties in case the Court should decide that defendants 1 and 2 had as charge-holders ""any right
to redeem or otherwise in respect of the mortgage in favour of the 3rd defendant and the plaintiff."" In the amendment application the plaintiff stated
that he should be given relief with respect to the suit properties as the holder of the sub-mortgage which he had alleged the 3rd defendant had given
him of the suit properties. He prayed for permission to add a new paragraph to the plaint as paragraph 15-a and to amend Clause (d) of paragraph
18 by inserting in it suitable words to describe clearly the nature of the relief claimed by him. The new paragraph and the words sought to be
introduced in the relief portion are as follows:
Para. 15-A : ""In case it be held that the sale by the 4th defendant to the plaintiff does not pass any title the plaintiff is entitled to the mortgage
decree for sale of the undermentioned properties for realisation of a sum of one lakh of rupees, being a proportionate part of the mortgage amount
due on the under-mentioned properties.
In Clause (d) of paragraph 18 he sought to add after the words ""in favour of the 3rd defendant and the plaintiff"" and the words ''such rights,
etc.,'' the following:
The undermentioned properties may be ordered to be sold for realisation of a lakh of rupees out of the mortgage money due on the
undermentioned properties together with subsequent interest and costs and such right.
The amendment was opposed but it was allowed by the learned Judge. A petition to revise this order of amendment filed by the present
appellants (C.R.P. No. 163 of 1931) was dismissed by the High Court on the 9th February, 1931, with the remark ""I see no reason to interfere.
The question whether this amendment was proper will be considered by us in dealing with the question whether the suit is maintainable.
We will now proceed to consider the various questions in order. The first question is whether the plaint mentioned equitable mortgage in favour
of the 3rd defendant is true and valid; or in other word''s, whether there is any equitable mortgage capable of legal proof having regard to the fact
that there was a written memorandum (to which reference will be made presently) relating to the matter which was not registered under the
Registration Act.
Evidence shows that Tawker & sons had pledged their jewels with various firms and persons. In order to redeem them they entered into an
agreement with Nagarseth & Sons, the 3rd defendant, and obtained advances of moneys from time to time. As security for the advances it was
agreed that Nagarseth & Sons were to have pledge of the jewels to be redeemed and that immovable properties should also be given as collateral
security by way of deposit of title-deeds. On this understanding, which was oral, various sums of money were advanced from the middle of June,
1916, to the Tawkers by the Nagarseths. Ex. XVIII is a letter written by the Tawkers to Nagarseth & Sons on the 17th June, 1916, in which after
acknowledging that they have received Rs. 75,000, they agreed to deposit title-deeds relating to immovable properties. Ex. XVIII-A shows that
on the 19th June, a sum of Rs. 80,000 was advanced and the Tawkers agreed to give collateral security by deposit of title-deeds. Ex. XVII, a
letter dated the 1st July, 1916, refers to these and other payments of Rs. 80,000 (29th June, 1916) and Rs. 5,400 (1st July, 1916) all of which
were made between the 17th June, and the 1st July, 1916. On or after 9th September, 1916, a written agreement was executed by Nagarseth &
Sons and Tawker & Sons embodying the terms of the oral agreement of June, 1916. (The document bears no date but the stamp on which it is
engrossed bears the date 9th September, 1916.) It makes reference to the previous loans and to the deposit of title-deeds as security and states
that these loans must be considered to have been made under the terms of this agreement and fixed 11 lakhs of rupees as the limit of the advance.
The plaintiff''s case is that in pursuance of the oral agreement between the parties in June, these moneys were advanced from time to time and the
title-deeds were deposited subsequently and that Ex. H is a subsequent formal document evidencing the original understanding. The first deposit of
title-deeds was made in June, 1916 and the deposit was completed by the end of June - prior to the 1st July, 1916. The agreement and the
deposit of title-deeds before 1''st July, 1916, are proved by the evidence of P.W. 3, 4 and 5 particularly the evidence of P.Ws. 4 and 5 whose
testimony on these points has been accepted by the lower Court for cogent reasons. We have been taken through their evidence and we see no
reason to reject the same. P.W. 3 is the broker who negotiated the loan. P.W. 4 was the manager of the third defendant''s firm. He is an advocate
of the Bombay High Court, a member of the Bombay Municipal Corporation and a member of its Standing Committee and is also the trustee of
the City and Bombay Improvement Trust. P.W. 5 is Kasthuribhai Nagarseth, a partner. He states that the agreement of advance was originally
oral, that it was subsequently reduced to writing, that the title-deeds were given to him in the last week of June, 1916, and that he handed them to
his manager P.W. 4 to put them into the safe. The argument of the appellant on the point is not so much that the evidence of these witnesses should
not be believed as that that evidence being oral is inadmissible, having regard to the unregistered written memorandum executed by the parties
which for want of registration cannot be accepted in evidence under the Registration Act. The decree in C.S. No. 3772 of 1922 on the file of the
Bombay High Court was obtained by the third defendant against Tawker & Sons on the basis of the equitable mortgage. (See Ex. L-1.) This no
doubt is not evidence against defendants 1, 2 and 5 who were not parties to that suit, but it is an instance in which the right now claimed and set up
was recognised by the Court. Apart from the oral evidence, the most direct evidence to prove the equitable mortgage is Ex. D-14.
Ex. D-14 is a memorandum dated 1st July, 1916, given by the Tawkers to Nagarseth & Sons. It runs as follows:
We have pledged with you as equitable mortgage as agreed in our writing with you:
(1) Vadavoor village properties, papers worth Rs. 3,00,000.
(2) Pallikarney property, papers worth Rs. 1,00,000.
(3) Bangalore bungalow worth Rs. 45,000.
(Sd.) T.R. Tawker & Sons.
1st July, 1916.
To
Messrs. Nagarseth & Sons, Bombay.
It is signed ''T.R. Tawker & Sons''. The first item of property referred to in it is the present suit property. Exs. M, M-1 and M-2 are the three
title-deeds alleged to have been deposited with Nagarseth & Sons in respect of these properties.
u/s 58(f) of the Transfer of Property Act, a transaction called a mortgage by deposit of title-deeds can be created by a person by delivering to
a creditor or his agent documents of title to immovable property, with intent to create a security thereon. Section 59 provides that:
Where the principal money secured is one hundred rupees, or upwards, a mortgage other than a mortgage by deposit of title-deeds can be
effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses.
The equitable mortgage in the present case took place in Bombay and does not require registration under the provisions of the Transfer of
Property Act.
u/s 17 of the Registration Act, registration is required of (a) instruments of gift of immovable property; (&) other non-testamentary instruments
which purport or operate to create, declare, assign, limit or extinguish whether in present or in future, any right, title or interest, whether vested or
contingent, of the value of one hundred rupees and upwards, to or immovable property. By Section 49 of the Act it is provided that:
No document required by Section 17 or by any provision of the Transfer of Property Act, 1882, to be registered shall, (a) affect any immovable
property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or
conferring such power, unless it has been registered.
The learned Counsel for the appellant argues that in the present case the memorandum Ex. D-14, is in itself the equitable mortgage, that, having
regard to Sections 17 and 49 of the Registration Act it is void, inasmuch as it was effected by an instrument which was admittedly not registered,
and that oral evidence is not admissible as the memorandum constituted the contract between the parties (Section 91 of the Evidence Act). On the
other hand the respondent''s learned Counsel argues that the act of deposit which constitutes the equitable mortgage was not effected by Ex. D-14,
that it is merely a memorandum of the completed transaction of mortgage, that it does not therefore require registration and that in the
circumstances oral evidence is admissible to prove the deposit.
The question we have to consider is whether Ex. D-14 having regard to its construction and the circumstances in which it came into existence,
is an instrument, within the meaning of Section 17 of the Registration Act, which purports or operates to create or declare, whether in present or in
future, any right, title and interest, whether vested or contingent, in the suit properties, which are admittedly over the value of Rs. 100.
Various cases were brought to our notice to explain the principles that should be applied in deciding this question. We will refer only to a few
of the more important of these decisions. In the leading case of Shaw v. Foster (1872) 5 H.L. 321 Lord Cairns observed:
Although it is a well-established rule of equity that a deposit of a document of title without more, without writing or without word of mouth, will
create in equity a charge upon the property referred to, I apprehend that that general rule will not apply, when you have a deposit accompanied by
an actual written charge. In that case you must refer to the terms of the written document, and any implication that might be raised, supposing there
was no document, is put out of the case and reduced to silence by the documents by which alone you must be governed.
In Kedarnath Dutt v. Shamloll Khettry (1873) 11 B.L.R. (O.C.J.) 405 Couch, C.J., said:
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 into
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 of the Registration Act.
In Pranjivandas Jagjivandas Mehta v. Chan Ma Phee (1916) 31 M.L.J. 155 : L.R. 43 IndAp 122 : 1916 ILR 43 Cal. 895 (P.C.) the Privy
Council laid down the law as follows:
The law upon this subject is beyond any doubt: (1) Where titles of property are handed over with nothing said except that they are to be security,
the law supposes that the scope of the security is the scope of the title. (2) Where, however, titles are handed over accompanied by a bargain, that
bargain must rule. (3) Lastly, when the bargain is a written bargain, it, and it alone, must determine what is the scope and extent of the security.
Applying the principles laid down in these cases, Lord Carson said in Subramanian v. Lutchman (1922) 44 M.L.J. 602 : L.R. 50 IndAp 77 :
ILR 50 Cal. 338 (P.C.) the test is:
Did the document constitute the bargain between the parties, or was it merely the record of an already completed transaction?
As observed by Sir Walter Schewabe, C.J. (with whom Ramesam, J., concurred in Krishnayya v. Ponnuswami Aiyar (1923) 46 M.L.J. 295 :
ILR 1923 Mad. 398:
If it constitutes the bargain, then, on the well-known rule that, where contracts are reduced to writing, you cannot give parol evidence of their
contents. In order to prove the mortgage, the plaintiff would have to attempt to put in as evidence the document and, if it is a mortgage document,
he would be precluded from so doing by the Transfer of Property Act and under the Registration Act. The question in each case, which it is
difficult to decide, is whether or not the document does constitute the bargain, or is merely a record of a completed transaction.
In affirming the judgment of this Court, the Privy Council in 35 CWN 494 (Privy Council) referred to Subramanian v. Lutchman (1922) 44
M.L.J. 602 : L.R. 50 IndAp 77 : ILR 50 Cal. 338 (P.C.) and observed as follows:
While their Lordships do not think that the language of Lord Carson conveys or was intended to convey the meaning that no memorandum relating
to a deposit of title-deeds can be within Section 17 of the Registration Act, unless it embodies all the particulars of the transaction 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. (The Italics are ours.)
Shortly stated, the question we have to consider is, does Ex. D-14 constitute the agreement with respect to the deposit between the parties, or
is it simply evidence of a fact from which the mortgage could be inferred? The document states that the executants have pledged as agreed upon in
their writings, papers relating to the properties mentioned in it. The question arises, when was the pledge made, was it contemporaneous with the
execution of the document or was it before or after. It appears to us having regard to the language used, that the pledge must have been made at a
date anterior to the execution of the document; in other words, the deposit as agreed to must have been made before the document Ex. D-14 was
executed; otherwise, the expression used would not have been ""we have pledged"". The agreement of deposit must have been therefore a prior
one. In Krishnayya v. Ponnuswami Aiyar (1923) 46 M.L.J. 295 : ILR 1923 Mad. 398 the learned Judges pointed out that when one looks at the
cases the easiest guide in determining 5 the question whether the document constitutes the bargain or not, is the question whether or not money
was paid before the making of the document, because of the money is handed over contemporaneously with or in exchange for the document or
after the document it will be very difficult to establish that the document did not contain the terms of the bargain between the parties. If we apply
this test to the present case we find that the understanding was that advances were to be made from time to time and the moneys were as a matter
of fact advanced before Ex. D-14 was executed. The contract therefore must have been before Ex. D-14 and the document can only be the
record of a transaction that was completed sometime before in the past. Except the fact that a pledge has been made, it is clear that the document
does not on its face embody, to use the language of their Lordships of the Privy Council, ""the particulars of the transaction of which the deposit
forms a part"", or in other words, the contract with respect to the deposit. It is argued that the statement contained in the document ""as agreed upon
in the writings with you"" amplifies its scope and thereby introduces into the document the terms of the bargain between the parties. We cannot
accept this argument. The writings referred to are Exs. XVIII and XVIII-a. Shortly stated, in these documents already referred to, the executants
merely state that with respect to the moneys borrowed, Rs. 75,000 under Ex. XVIII on the strength of certain hundies and Rs. 80,000 under Ex.
XVIII-a on a promissory note, they agree to deposit title-deeds with the lenders creating equitable mortgages and Ex. D-14 says that in pursuance
of this agreement to deposit the title-deeds (that is, as agreed to in the writings) the deposit has already been made of the title-deeds of properties
mentioned in it. The references to these documents does not thereby introduce into Ex. D-14 and the terms of the bargain between the parties.
These words ""as agreed upon in the writings"" can only mean this and nothing more, namely:
We have agreed to deposit the title-deeds and we have deposited the following title-deeds as agreed in the writings referred to.
In our opinion the words are not adequate enough to incorporate the whole of those documents in this one document. Even assuming that
everything stated in those documents is incorporated in Ex. D-4, still the document says that the deposit has already been made; about that there
can be no doubt. If so, the equitable mortgage was completed before Ex. D-14 was written and is a past transaction. Ex. D-14 is, therefore, only
a memorandum of a completed transaction. In whichever manner we examine the document, it seems to us that it refers to a past act of deposit
and the equitable mortgage thereby created was complete without this memorandum.
For helping us in construing the expression ""we have pledged"" appearing in Ex. D-14 our attention'' was invited to numerous cases of equitable
mortgages wherein Courts were called upon to construe expressions of similar import like the one we are considering. These are Kedarnath Dutt
v. Shamloll Khettry (1873) 11 B.L.R. (O.C.J. 405) Oo Noung v. Moung Htoon Oo I.L.R.(1886) Cal. 322 P.M.A. Muthia Chetty Vs. P.V.
Kothandaramaswami Naidu, , Vadamalai Pillai v. Subramania Chettiar (1922) 16 L.W. 936 ubramanian v. Lutchman (1922) 44 M.L.J. 602 :
L.R. 50 IndAp 77 : ILR 50 Cal. 338 (P.C.) Krishnayya v. Ponnuswami Aiyar (1923) 46 M.L.J. 295 : ILR Mad. 398 Bhuban Mohan Ghose Vs.
Co-operative Hindusthan Bank Ltd. and Others, , Ramakrishna Doss Chandrathna Doss Vs. P. Kesavalu Chetty and Others, , Kshetra Nath
Sikdar and Others Vs. Harasukdas Balkissen Das and Others, , Ralli Brothers v. Punjab National Bank I.L.R.(1930) Lah. 564 Jagannadham Pillai
v. The Official Assignee of Madras (1930) 60 M.L.J. 309 35 CWN 494 (Privy Council) Surendramohan Ray Chaudhuri v. Mahendranath Banerji
I.L.R.(1931) Cal. 781 Kalidas Chandra v. Jugalkishore Datta ILR (1935) Cal. 998 Krishnaswami Aiyangar v. Gouriamma AIR 1936 Mad. 256
and Moti Ram v. Bharat National Bank AIR 1921. Lah. 253. A few of these containing general principles have already been noticed Kedarnath
Dutt v. Shamloll Khettry (1873) 11 B.L.R. 405 Subramanian v. Lutchman (1922) 44 M.L.J. 602 : 1922 L.R. 50 IndAp 77 : ILR 50 Cal. 338
(P.C.) Krishnayya v. Ponnuswami Aiyar (1923) 46 M.L.J. 295 : ILR 1923 Mad. 398 and 35 CWN 494 (Privy Council) the rest we have read;
but we do not think any useful purpose will be served by discussing them as the decision in each case must necessarily depend upon the
construction of the terms contained in the memorandum dealt with in that case in the light of its special circumstances.
The circumstances already adverted to, show that the moneys were advanced on various dates in June, the deposit of title-deeds was
completed towards the end of that month; and it was after these were done, that Ex. D-14 was executed as memorandum. As already stated, in
our opinion it is only a record of a completed transaction and there is nothing in the circumstances connected with its coming into existence which
requires us to give a different meaning. We hold that Ex. D-14 does not require registration and affords along with other evidence complete proof
of the equitable mortgage in question. If Ex. D-14 does not require registration, it has not been shown how the equitable mortgage is invalid. In our
opinion the oral evidence of the witnesses already referred to, Ex. D-14 and the decree in the Bombay suit prove to our complete satisfaction that
the alleged equitable mortgage is true.
Before we leave this question we may mention that it was argued in the lower Court that Ex. D-14 was got up subsequent to Ex. H and was
ante-dated and should on that account alone be thrown out of consideration, but the learned Judge held that this suggestion was not proved; see
paragraphs 11 and 12 of the judgment. No special ground has been taken against that finding in the memorandum of appeal and the learned
Advocate-General after alluding to the point in the earlier part of his argument, abandoned it altogether and so we do not consider it in this
judgment.
The next question is whether the plaint mentioned sub-mortgage in favour of the plaintiff is true and valid (issue 2).
His Lordship discussed the evidence and concluded.
On a consideration of the evidence as a whole, both direct and circumstantial, we hold that the suit sub-mortgage is true.
The next question is whether the equitable sub-mortgage, which we have found to be true, is valid in law. It will be observed that the suit sub-
mortgage was created by a re-deposit by the Nagarseths with the plaintiff of the very title-deeds, Exhibits M, M-1 and M-2, deposited with them
originally by Tawker & Sons. It is argued that since it is the mortgagee''s interest that is being sub-mortgaged, a sub-mortgage of such interest by
depositing the title-deeds can be created only by depositing the title-deed evidencing the title of the mortgagee, and, since admittedly no such
document has been deposited as none such is in existence, the mere re-depositing of the title-deeds of the original mortgagor cannot in law create a
valid equitable sub-mortgage. Shortly stated what is urged is that while a sub-mortgage by deposit of title-deeds of a mortgage effected by a
registered deed is valid, such a sub-mortgage of a mortgage itself created by deposit of title-deeds is invalid because there is no document
evidencing his own title for the mortgagee to make the deposit. It is contended that this must follow from the definition of ''mortgagee by deposit of
title-deeds'' in Section 58 of the Transfer of Property Act. No authority in support of this contention has been brought to our notice. On the other
hand, there is an authority in the Indian Reports directly against it, wherein the relevant English authorities have been referred to - see Gurnam Kaur
v. R.K. Banerjee I.L.R.(1936) Rang. 522. In that case Mosely, J., with whom Ba U, J., concurred, dealt with the contention as follows:
A mortgage of immovable property is itself an interest in immovable property and can be itself mortgaged. The transaction is called a submortgage.
It would appear prima facie that such a sub-mortgage can be made by deposit of title-deeds in exactly the same way as an original mortgage can.
Admittedly in England (where the corresponding terms are ''equitable mortgage and sub-mortgage) equitable sub-mortgages of equitable
mortgages can be made, vide Hildyard, Re : Ex parte Smith (1842) 11 L.J. (Bktcy.) 16. See also Fisher''s Law of Mortgage, 6th edition, p. 18,
paragraph 30; Halsbury''s Laws of England, Volume 23, 2nd Edn. p. 238 and Bower, Volume II, p. 924, paragraph 1485.
Then after referring to some judgments of the Indian Courts to show that they do not affect the above position, the learned Judge stated:
I can see no reason why a sub-mortgage by deposit of title-deeds in the case where the original mortgage has been by deposit of title-deeds
should not be valid. This appears to be clearly in accordance with law, nor has any reason of practice or convenience been argued against it.
We entirely agree with the above opinion of the learned Judge. If in law a mortgagee''s interest in property can be created by the mere deposit
to him of title-deeds of the mortgagor, we see no reason why the mortgagee''s interest thus created cannot be sub-mortgaged by depositing the
very title-deeds the deposit of which with him created his interest in the property. We cannot find anything in Section 58, Clause (f) of the Transfer
of Property Act against the validity of an equitable sub-mortgage of a mortgage created by deposit of title-deeds. In England there never was a
doubt about the validity of such a sub-mortgage. In our opinion the suit sub-mortgage is true and valid in law.
The equitable mortgage and the sub-mortgage having been found to be true and valid, the question arises, to what extent these are capable of
enforcement against defendants 1 and 2; see issues 1 and 8. The melwaram right in all the 58 acres of Vadavoor village excepting the right in a
small portion was acquired by the Tawkers under Exhibit M-l. The learned Judge is not strictly right when he says that under the document the
Tawkers obtained the melwaram right of all the lands. Under the same document they also obtained the kudivaram right over some of the lands.
The kudiwaram right in respect of the other lands were obtained by them under Exs. M-2 and VII and XVI. In the view that we take of the
arguments advanced before us it is not necessary to discuss the exact extent of the melwaram and the kudiwaram interest obtained by the Tawkers
under the abovementioned documents. Suffice it to say that it is freely conceded by the respondents that there are certain lands in which the
Tawkers own melwaram and certain lands in which they own kudiwaram which are not included in Exs. M-1 and M-2. In other words, all the
title-deeds respecting the entire interest which the Tawkers have in the suit properties have not been deposited by them with the Nagarseths. As
the learned Judge points out, the fact that Exs. VII to XVI were produced by the defendants indicates that all the documents under which they
obtained all the rights which they owned in the properties were not deposited with the Nagarseths. In the suit the claim is made against the entire
interest of the Tawkers in the suit properties. As all the documents relating to their entire right over the suit properties were not deposited by them
with the Nagarseths, it is argued that no equitable mortgage was obtained of the entire interest of the Tawkers in the properties and the equitable
mortgage and the sub-mortgage are effective only to a limited extent. We cannot accept this argument. Evidence makes it clear that the intention of
the parties was that the entire right which the Tawkers had over the suit properties should be mortgaged to secure the loans advanced to them by
the Nagarseths. In Ex. S the Tawkers state that ''lands at Vadavoor'' (the italics are ours) ''are now with the Nagarseths as security''. In Ex. T, the
mortgage executed to Chathurbhoojadoss Kusaldas by the Tawkers, it is stated that the mortgage over the Schedule B properties which include
the lands in the Vadavoor village is a second mortgage. The evidence bearing on the question which properties the Tawkers intended to mortgage,
is considered by the learned Subordinate Judge in paragraph 18 of the judgment. It was not seriously contended, nor do we think it can be
contended in the circumstances of the case, that it was not the intention of the partiesto mortgage the entire Vadavoor properties belonging to the
Tawkers. We accept the finding of the learned Judge on this point : and we know that all the documents mortgaged with the Nagarseths were sub-
mortgaged by them to the plaintiff. There is ample authority both in England and in India to show that a deposit of some of the title-deeds relating
to a property is enough to create a valid equitable mortgage over the entire property if it was the intention of the parties that the mortgage should
be in respect of the entire property to which the documents of the title relate. Wetherell, Exparte (1805) 32 E.R. 1141 is authority for the position,
that equitable mortgage with respect to the entire security could be created from a deposit of part of the title-deeds if from the evidence it can be
gathered that the object of the parties was to create a security upon the whole property. In Lacon v. Allen (1856) 61 E.R. 1024 it was held that
It is not necessary to create an equitable mortgage, that all the title-deeds or even all the material title-deeds should be deposited; it is sufficient if
the deeds deposited are material evidence of title and proved to have been deposited with the intention of creating a mortgage.
See also Roberts v. Croft (1857) 53 E.R. 343 where it was held that to constitute a good equitable mortgage it is not necessary that the deeds
deposited should show a good title in the depositor. In that case a solicitor made an equitable deposit of the title-deeds of his estate to his client,
committing the conveyance to himself. He afterwards deposited the latter as a security, with his bankers. It was held that the client had priority over
the bankers. (See the headnote.) The Indian authorities are also to the same effect. In Bhupendra Nath Basu v. Mt. Wajihunnissa Begum (1917) 2
Pat. L.J. 293 it was pointed out that:
There is no technical rule that in an equitable mortgage all the title-deeds should be deposited. It is merely a question of intention,
whether the mortgage was of the entire property. See also V.E.A.R.M. Chettyar Firm v. A.K.R.M.M.K. Chettyar Firm I.L.R.(1928) Rang. 28
Ramakrishna Doss Chandrathna Doss Vs. P. Kesavalu Chetty and Others, and Ralli Brothers v. Punjab National Bank I.L.R.(1930) Lah. 546.
For the above reasons we hold that though the title-deeds deposited were only Exhibits M-l and M-2 the equitable mortgage took effect over the
entire suit properties as the parties intended that the entire interest of the Tawkers in the properties should be mortgaged. The same is the case with
the sub-mortgage also.
The next question is, is the plaintiff''s claim to enforce the equitable mortgage barred by time? This is raised in both issues 9 and 18. The
equitable mortgage to the 3rd defendant was in June, 1916. The plaint in the present suit was filed on 8th December, 1928. Under Article 132 of
the Limitation Act, the article applicable to the case, the suit should be filed within 12 years from June, 1916. Admittedly, it has been filed more
than 12 years subsequent to the date of the mortgage and is therefore barred by time. But the plaintiff in order to save limitation relies on an
acknowledgment of the mortgage debt contained in Exhibit S u/s 19 of the Limitation Act. In 1924 Tawker & Sons executed a mortgage, Exhibit
T, in respect of Vadavoor, the present suit properties, and other properties to Chathurbhujdoss Khusaldoss & Sons, Madras. Before the
execution of the deed they gave to Chathurbhujdoss Khusaldoss & Sons a letter, Ex. Section In it the Tawkers state:
In consideration of withdrawing the suit pending now and also to cover up any deficiency in all the claims and accounts we hereby give you a lien
on the following undermentioned properties now with Messrs. Nagarseth & Sons of Bombay as collateral security."" (The italics are purs.)
The list of the properties mentioned in it contains ''Lands at Vadavoor in Trichinopoly'' as item 5. The date of this letter is the 12th February,
1922. The plaintiff relies on this to show that the Tawkers admitted the mortgage right in favour of the Nagarseths in respect of the suit lands. If this
document is admissible in evidence, it clearly amounts to an acknowledgment of the existence of the mortgage. We may also mention that in Ex. T
the Vadavoor lands are described as having been given as second mortgage to Chathurbhujdoss Khusaldoss & Sons. The Tawkers herein admit
the subsisting liability of the mortgage in favour of the Nagarseths. Ex. S is an unregistered document and on that ground objection is taken that it is
not admissible in evidence. In our opinion, even if registrable, as the document is relied on only as evidence of a collateral fact, namely, an
acknowledgment by the Tawkers, it can be admitted in evidence u/s 49 of the Registration Act. There is abundance of authority in support of the
position that a compulsorily registrable document, though unregistered and inadmissible as evidence of a transaction affecting immovable property
may be admitted as evidence of a collateral fact or for any collateral purpose. In Varada Pillai v. Jeevarathnammal (1919) 38 M.L.J. 313 : 1919
L.R. 46 IndAp 285 : ILR 43 Mad. 244 (P.C.) the Privy Council pointed out with reference to certain petitions filed in the Court of the Collector
reciting the fact of a gift in that case that
although the petitions...are not admissible to prove the gift, they may nevertheless be referred to as explaining the nature and character of the
possession....
See also Mugniram v. Gurmukh Roy I.L.R.(1899) Cal. 334 Chitturi Venkataratnam and Others Vs. Siram Subba Rao, and Davindar Singh v.
Mt. Lachhmi Devi AIR 1930 Lah. 985.
The admission of the equitable mortgage contained in Ex. S is of the year 1922, before defendants 1, 2 and 5 acquired any right in the
properties. It is within 12 years after the date of the mortgage and within 12 years before suit. We hold therefore that the suit is not barred by time.
(Apart from these documents the debt and the mortgage were clearly set out in the schedules to their insolvency petition which Tawkers filed in
1925.)
The next question for decision is, is the claim set up in suit barred by Order 2, Rule 2, Civil Procedure Code, by reason of the filing of C.S.
No. 3772 of 1922 in the Bombay High Court?
His Lordship discussed the evidence with reference to the relevant provisions of law and concluded.
In the light of the circumstances adverted to above we have no doubt that the suit of the present plaintiff is not barred by reason of the suit C.S.
No. 3772 of 1922 filed in the Bombay High Court.
The last question for consideration is, is the suit as framed not maintainable? It will be observed that by the time the plaintiff filed the suit he
had, with the previous permission of this Court sitting in insolvency, obtained the sale of the suit properties from the Official Assignee. Having thus
become the owner of the equity of redemption he could no longer sue to enforce his mortgage by the sale of the properties. The suit was originally
filed, therefore, for possession of the lands. On the 15th November, as already stated, the plaint was amended by the addition of an alternative
prayer for a mortgage decree for sale in case it should be held that the conveyance of the land by the Official Assignee to the plaintiff did not pass
any title. We have already referred to the amendment application and the order passed thereon. The objection urged by the appellants to the frame
of the suit is that the suit which the Act of Bombay permitted the plaintiff to file was a suit on the mortgage, that under the terms of that Court''s
order he was bound to file a suit within the 10th December, 1928, but that he did not in effect file it till the 15th November, 1930, when the
amendment just mentioned was allowed to be made to the plaint. We do not think that this objection should be allowed to prevail. We think that
the suit as originally filed includes an alternative claim based on the plaintiff''s mortgage right. See paragraphs 12 and 13 of the plaint the relevant
portions of which are as follows:
Para. 12 : ...he (plaintiff) is informed that the claim of the 1st defendant is based upon a charge over the plaint schedule properties alleged to have
been created in his favour by Messrs. Tawker & Sons in the month of July, 1923, in the course of the execution proceedings in C.S. No. 196 of
1921 on the file of the High Court of Judicature at Madras to which the plaintiff was not a party.
Para. 13 : The plaintiff states that any claim of the 1st defendant whether based upon the said charge created in the year 1923 or otherwise cannot
prevail against the rights of the plaintiff and can only be subject thereto. Both the mortgages in favour of the plaintiff as well as in favour of the third
defendant (Nagarseths) having been earlier in date to the date of the alleged charge are entitled to priority and any claim of the first and second
defendants cannot prevail against the claims of the plaintiff or the third defendant. The plaintiff is not bound by either the alleged charge in favour of
the first defendant or the proceedings pursuant to the said charge culminating in the purchase of the plaint schedule lands by the first defendant, etc.
Then in the prayer portion, paragraph 18(d), we have a definite indication of the plaintiff''s alternative claim as follows:
The plaintiff therefore prays for judgment that if this Hon''ble Court should decide that on the charge claimed by defendants 1 and 2 they had as
representing the Tawkers...any right to redeem or otherwise in respect of the mortgage in favour of the third defendant and the plaintiff"", such rights
if any may also be determined by this Hon''ble Court and appropriate directions given by the Court in respect of the working out of the relative
rights of the respective parties.
On this pleading we are of opinion that even without the amendment it was open to the Court to treat this suit in the alternative as a suit for sale
by a prior mortgagee against a person claiming under a title derived from a subsequent mortgage. Apart from this, it is clear that even if it is not
prayed for in the plaint the Court can grant a relief which is not inconsistent with the facts of the case, provided the defendant is not placed at any
disadvantage in the course of the trial by reason of the defect in the pleadings.
The plaintiff''s suit for a relief on his sub-mortgage being thus maintainable even according to the original plaint, there was no need for amending
the plaint by the addition of an alternative prayer for a mortgage decree for sale. That the plaint was understood in the way in which we have
interpreted it becomes clear when we examine the issues. Issue 8 states:
Is the plaintiff entitled to enforce his claim, if any, under the plaint mentioned equitable mortgage, etc.?
This issue shows clearly that even before the amendment it was clearly understood by the Court that the plaintiff did claim relief on the basis of
his equitable mortgage. And in paragraph 18(d) he asks that the relative rights of the parties that is, the right of defendants 1 and 2 to redeem and
of the plaintiff to bring the properties to sale, may be worked out. By amending the plaint the plaintiff wanted to bring out in full relief his right to sell
the suit properties based on the grant of the sub-mortgage. In the circumstances we do not think that by the amendment the plaintiff was setting up
a new case or asking for a relief not originally asked for in the plaint. In this connection reference may also be made to the order of amendment
passed by the learned Judge. For the above reasons we overrule the objection that the suit as framed is not maintainable.
No other points were argued before us. For the reasons given above, on the points argued we accept that the opinion of the learned
Subordinate Judge who has dealt with all the points in the case very ably and clearly in his judgment. Before we conclude, we may say that no
personal decree against defendants 1 and 5 is contemplated under the decree except for costs. In the result the appeal is dismissed with costs. We
certify costs for two counsel for the respondents.