Karamadai Naicken v. R. Raju Pillai And Another.

1. The second defendant is the appellant. The suit was instituted for recovery of a sum of Rs. 900 due under a mortgage, dated 9th March, 1922. The mortgage was executed by the first defendant in favour of one Mariyayi. Mariyayi died sometime in 1923 leaving behind her Chockalinga, her husband, and Kanakammal, a daughter and Ayyaswami Pillai, a son. Chockalinga died some time before 1931. The exact date of death is not known. The mortgagor intended to discharge the mortgage in 1931, and on the assumption that Ayyaswami, the son of the mortgagee, was entitled to the amount due under the mortgage, executed a deed of assignment of a usufructuary mortgage executed in his favour by a third party, in favour of Ayyaswami, This deed of assignment is Ex. P-2, dated 9th September, 1931. The mortgage debt due by that date was ascertained and was found to be Rs. 609. He executed a promissory note for a sum of Rs. 200 on that date. The consideration for the assignment by the usufructuary mortgage was taken to be Rs. 300 and a cash of Rs. 109 was paid to make up the total of Rs. 609 due under the mortgage in favour of Mariyayi. Thus the entire mortgage debt was discharged by this arrangement with the son of the mortgagee. The first defendant sold the property comprised in the mortgage to one Palanisami in July 1937 and from Palanisami the second defendant purchased the property on the nth June, 1942. After all this, Kanakammal, the daughter of Mariyayi, executed in favour of the plaintiff a deed of assignment in respect of the mortgage debt due under the mortgage executed by the first defendant on the 9th March, 1922. On the basis of this assignment the assignee instituted the present suit to enforce the debt under the mortgage deed. The assignment by Kanakammal was on the footing that the mortgage debt was the stridhana property of Mariyayi, and that after her death it had devolved upon her as her heir.

2. In the suit the first defendant was ex parte as he had no interest in the property, and the second defendant was the main contesting defendant. The chief among the pleas raised by the defendant were that the mortgage debt was really the property of the family of Chockalinga and Ayyaswami, that Mariyayi was merely a name-lender, and that therefore the discharge of that debt by the arrangement evidenced by Ex. P-2 was valid; and secondly that as the mortgage was dated 9th March, 1922, and the present suit was instituted only on the 6th September, 1943, the suit was barred by limitation. The plaintiff anticipated the plea of limitation and relied upon Ex. P-2 as containing an acknowledgment of the liability by the first defendant.

3. The trial Court upheld both the contentions of the defendant and dismissed the plaintiff's suit. On appeal the learned Subordinate Judge reversed the decision on both the points and decreed the plaintiff's suit.

4. The only question that was argued in second appeal was the question of limitation. Unless Ex. P-2 contains a valid acknowledgment within the meaning of Section 19 of the Limitation Act, the plaintiff's suit would be barred by limitation. Under Ex. P-2 the first defendant admitted that the mortgage debt amounted to Rs. 609 but stated that it was discharged by the execution of the promissory note, by the assignment of the usufructuary mortgage and by payment of cash. The question therefore that arises for consideration is whether the statement of the first defendant in Ex. P-2 that there was a liability under a mortgage but that it was discharged amounts to an acknowledgment. In other words, is it an admission of a subsisting liability in respect of the mortgage debt and does it contain an acknowledgment of a subsisting jural relationship of debtor and creditor between the mortgagor and the mortgagee? When the statement of liability is coupled with a statement that it is discharged it is difficult to see how a subsisting, liability on that date could be inferred. The learned District Munsiff held that there was no subsisting liability in view of the clear language of the document. The learned Subordinate Judge however dissects the statement into two parts, the first part containing an admission of liability and the second part the mode in which it was discharged. Ignoring the second part he fastens himself to the first and concludes that there is a subsisting liability. In my opinion, this kind of dissection of the statement of the first defendant in Ex. P-2 is not permissible. The statement must be taken as a whole and the intention of the first defendant must be gathered by reading the document as a whole and not by confining attention to a particular portion of it. In my opinion, therefore, the process of interpreting the document adopted by the learned Subordinate Judge is wrong.

5. The learned advocate for the respondents drew my attention to some of the decisions in which in circumstances somewhat different the Courts have construed documents containing acknowledgments as acknowledgments of a subsisting liability; but the more relevant decision in my opinion is the decision reported in Rangaswami Chetty v. Thangavelu Chetty (1919) I.L.R. 42 Mad. 637. In that case as in the present, the statement by the debtor that he was under a liability was coupled with a statement that he had discharged the debt and it was held that such a statement did not amount to an acknowledgment of any subsisting liability. This decision, so far as I am aware, was never dissented, and on the other hand was cited with approval by this and other High Courts. The decision on which strong reliance was placed by the learned advocate for the respondents is the decision of Varadachariar, J., in Ramasami Mestriar v. Velayutham Pillai (1938) 1 M.L.J. 450. In that case the mortgage which was put in suit was dated 15th November, 1913. By a later sale deed of 11 th November, 1921, the debtor made an arrangement for discharging the mortgage by sale of certain properties. Subsequently as there was a sub-mortgage on the property the sale deed became inoperative, and the debt could not be discharged in the manner contemplated by the parties. The mortgagee relied upon the recitals in the sale deed as constituting acknowledgment, when he was obliged to fall back on the mortgage and to enforce his rights under it. The learned Judge having regard to the nature of the document and having regard to the fact that the mode of discharge contemplated by the parties became ineffective held that there was a valid acknowledgment of a subsisting liability in the sale deed. The learned Judge cited by way of illustration cases where a mortgage debt was intended to be discharged by the parties by execution of a sale deed, which however remained at the stage of contract without a sale deed in writing and registered and the contract for some reason or other became unenforceable. In such a case where the contract was merely executory the learned Judge asks:

Can there be any doubt that the statement in the document will be available as an acknowledgment of liability? I do not see why the position should be different when the contemplated discharge proved ineffective because the mortgagee to whom the conveyance was made had by that time become incompetent in law to give a discharge by reason of the anterior sub-mortgage.

The situation therefore which the learned Judge was dealing was one where the parties substituted one arrangement for another, and for some reason or other the later arrangement became frustrated, and the parties were relegated to the old arrangement; and in such circumstances when the old arrangement was sought to be enforced it was possible to rely upon the statements in the later arrangement evidenced by a document as establishing a valid acknowledgment of a subsisting liability. The position in the present case is entirely different. The arrangement evidenced by Ex. P-2 did not become ineffective between the parties to the transaction. The plaintiff who is a stranger to the arrangement wants to repudiate the arrangement as not binding on him, as he became the true owner of the mortgage debt, and any discharge given by Ayyasami would not bind him. In such a case the principle of the decision in Ramasami Mestriar v. Velayutham Pillai (1938) 1 M.L.J. 450 has no application.

6. In Kondamma v. Venkatarayudu (1938) 2 M.L.J. 846 Madhavan Nair J. had to deal with a case where a promissory note was renewed, and at the time of the renewal an endorsement was made on the earlier note to the effect that a fresh promissory note was executed on that day for the amount due under the previous note and that therefore the earlier note became void. Later by reason of some defect in the stamp the later promissory note became unenforceable. The payee under the note was obliged therefore to fall back on the earlier note and rely upon the endorsement on it as constituting a valid acknowledgment. The question here also in my opinion is somewhat analogous to the position considered by Varadachariar, J., in Ramasami Mestriar v. Velayutham Pillai (1938) 1 M.L.J. 450. The second promissory note does not stand on the same footing as a payment or a complete transfer of property in discharge of a debt. It was merely a conditional payment. If that payment becomes ineffective it is open to the parties to fall back upon the earlier document, and the statement in the endorsement in the circumstances amounts to an acknowledgment of a subsisting liability or the existence of a jural relationship of debtor and creditor. The decision of Venkataramana Rao, J., in Kuppuswami Aiyar v. Sabapathi Pathan (1937) 2 M.L.J. 24 does not help the respondents. In that case there was merely a direction by the mortgagors to a third person in whose favour they had executed a usufructuary mortgage, to pay the mortgage debt, and this arrangement was repeated by the mortgagors in their reply notice to a demand made by the mortgagee for payment of the debt. It is obviously a case where there was a clear acknowledgment of a subsisting liability.

7. I do not think it is necessary to refer to the other decisions on the point, but two decisions which have been referred to in the judgment of Varadachariar, J., in Ramasami Mestriar v. Velayutham Pillai (1938) 1 M.L.J. 450 throw some light on the question now at issue. In Dajji Mehar v. Mahadeo Kumbi (1924) 79 I.C. 66 the Nagpur Judicial Commissioners' Court considered the decision in Rangaswami Chetty v. Thangavelu Chetty (1919) I.L.R. 42 Mad. 637 and it was distinguished on the ground that the document referred to therein recited that the judgment-debtor owed a debt, and that he had discharged it. Such a statement taken as a whole does not amount to an acknowledgment of a liability which is subsisting. There the admission of liability was coupled with an assertion that it was discharged. Of course if the admission was an unqualified one and not coupled with any further conditions or any other indications leading to the inference that the debt was discharged the position would be different. The other decision is that of the Patna High Court in Chhaterdhari Mehto v. Nasip Singh (1923) 78 I.C. 919. It was there held that a statement that there was a debt but that it had been discharged would not amount to an acknowledgment. Rangaswami Chetty v. Thangavelu Ccetty (1919) I.L.R. 42 Mad. 637 was referred to and cited with approval. These cases, in my opinion, bring out the distinction between cases where there was a mere statement that a debt was due and a statement that it was due but with the qualification added that it was discharged.

8. In these circumstances, in my opinion, the judgment of the learned Subordinate Judge holding that Ex. P-2 contained a valid acknowledgment of a subsisting liability and that the suit was not barred by limitation is erroneous.

9. The second appeal is therefore allowed, the decision of the learned Subordinate Judge is set aside and that of the learned District Munsiff restored with costs here and in the Courts below. No leave.