Madan Lal v. Ghasiram

Reuben, J.:— This appeal by the plaintiffs has been filed in the following circumstances:—

The plaintiffs are members of a joint Hindu family. Braja Nath Marwari, a former karta of the joint family, filed Money Suit no. 753 of 1928 against Ramchandra Singh Modak and others. During the pendency of the suit, under the provisions of Order XXXVIII of the Code of Civil Procedure, he obtained attachment of three villages Dhargram, Aria and Bamadih, belonging to the Modaks. The attachment was effected on the 15th of July 1928. On the 4th September 1928, the suit was decreed on compromise, the plaintiff getting a decree for Rs. 1,700 payable in certain instalments. The petition of compromise which was made part of the decree contained a provision:

“That on the defendants failing to pay any other instalments by the due date the whole of the unpaid balance of the decretal amount shall fall due and shall be realised by execution with interest thereon at 12 per cent, per annum from the date of default till realisation of the said sum by sale of the attached property. The order of the attachment before judgment to subsist till the decree money is not satisfied.”

The decree was put in execution in the year 1930 and the three attached villages were sold in execution of the decree on the 18th August 1931. The purchase was made by the joint family of the plaintiffs as decree-holders and the sale was confirmed on the 5th of December 1931. The property was sold subject to a simple mortgage executed on the 2nd April 1922 by the Modaks in favour of the defendants of the present suit. Previous to the execution sale and during the pendency of the execution proceedings the defendants of this suit had, on the 10th April 1931, sued the Modaks on the foot of the simple-mortgage bond of April 1922. In this suit, the joint family of the plaintiffs was not impleaded, nor was it made a party to the suit after the auction-sale. The mortgage suit was disposed of on compromise between the Modaks and the defendants of the present suit on the 6th January 1932. The defendants put the mortgage decree in execution (Execution Case no. 537 of 1932) and, on the 17th January 1933, purchased the three mauzas in execution of the mortgage decree. The sale was confirmed on the 18th February 1933, and the decree-holders auction-purchasers took delivery of possession on the 9th September 1933. On the 24th April 1944, the plaintiff's brought the present suit to redeem the mortgage of April 1922 contending that they were necessary parties to the mortgage suit of 1931 and that, not having been impleaded, they still have the right to redeem the mortgage. The suit has been dismissed by the learned Subordinate Judge. Hence, the present appeal.

The purchase by which the plaintiffs became the owners of the property occurred during the pendency of the mortgage suit. As such, it is affected by the doctrine of lis pendens. The present right of the plaintiffs to redeem, therefore, depends on whether in the circumstances preceding their purchase of the property they were necessary parties to the mortgage suit of 1931. It is contended that they were necessary parties on two grounds, firstly, that by the compromise between Braja Nath Marwari and the Modaks a charge, on the property was created in favour of the joint family, and, secondly, that under section 91, clause (f) of the Transfer of Property Act, as it stood when they purchased the property in the execution sale, they were entitled to redeem the simple mortgage; this right cannot be taken away from them by any transaction or litigation between third parties.

A charge is thus defined in section 100 of the Transfer of Property Act:—

“Where immovable property of one person is by act of parties or operation of law, made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property.”

Charges, therefore, may be divided into two classes, those created by an act of parties and those created by operation of law. According to the plaintiffs, the charge on which they rely was created by an act of the parties, namely, the agreement embodied in the compromise of 1928. It is well settled that the creation of a charge does not require the use of a particular form of words and that a charge may be created even though the word “charge” is not used. All that is required is that the intention that the property shall be security for the payment of money is made clear and that the transaction does not amount to a mortgage, that is to say, there is no transfer of an interest in the property, and it is contended strenuously that the intention is manifest that the property in question should be security for the decretal debt.

I find myself unable to accept this contention for the simple reason that by the agreement no liability on the property was imposed beyond the liability already imposed upon it by law. The relationship between the parties was not merely that of creditor and debtor but of decree-holder and judgment-debtor. The property in question had been attached under the provisions of Order XXXVIII of the Code of Civil Procedure. Under the provisions of rule 11 of this Order, the attachment would, in ordinary course, continue after the passing of the decree and the property was liable to sale in execution of the decree without re-attachment. This is all that is provided for in the first portion of the passage which I have cited above. The second portion of the citation provides that the attachment shall subsist till the decree is satisfied. That again, is merely a reproduction of the provisions of Order XXXVIII, rule 11. There is, therefore, no new liability which has been created by this compromise. All that has happened, is that the judgment-debtor; has agreed that the decree-holder may proceed in execution of the decree against certain property of the judgment-debtor. That such an agreement does not amount to a charge is clear from a perusal of the judgment in Baiju Lal Marwari v. Thakur Prasad Marwari. Their Lordships were concerned with the question whether an attachment of property in execution of a decree creates a charge on that property. The reasons given by them for answering this question in the negative apply mutatis mutandis to the present case. They pointed out, first of all that all that is effected by an attachment is that the judgment-debtor is prevented from alienating it by a private transaction. This, however, does not affect Court sales; for instance, where two decree-holders have attached the same property in execution of their money decrees but for some reason the decree-holder whose attachment is later succeeds in selling the property, the other, decree-holder whose attachment is prior cannot again bring the property to sale. Had an attachment of the property created a charge, the later attachment would have been subject to the earlier one. So also the contention that an attachment creates a charge is inconsistent with the provisions of section 73 of the Code relating to rateable distribution. This liabililty to Court sales in execution of other decrees and to rateable distribution exists in the present case, and there is nothing in the compromise to avoid the liability. For the creation of a charge, it is necessary that the property in question should be made a security for the payment in question. This requires something more than an agreement not to alienate the property until the debt is satisfied—in fact, a charge does not prevent alienation and a purchaser for value without notice of the charge gets a good title. It requires that the debt in question should be given a priority, so far as this property is concerned. Such a priority is not created by a mere agreement that the property in question shall remain attached by the Civil Court until the decretal debt is satisfied and shall be liable to be sold in execution for that debt. Hence, in my opinion, the compromise in this case does not show an intention to make the property the security and it did not create a charge.

Reliance for the appellants was placed on the decision in Sheonarain v. Lakhan. There, in addition to the agreement that the property would remain attached until the satisfaction of the entire decree, there were the words “and liable”. It was these two words, imposing a liability on the property as distinct from a mere agreement that the property should remain attached and subject to execution, which were relied on by Beevor, J., who delivered the leading judgment, for distinguishing the case from P. Sivanna v. Venkatakrisanamurthi. Their Lordships in this latter case had to consider the effect of the following words in a compromise decree:—

“Until the said amount of Rs. 13,000 is paid the items 17, 18, 19, 20, 21 these immovables of A schedule should not be dealt with by the 1st and 2nd defendants in any manner.”

They decided that these words did not create a charge, observing:

“The promise contained in the compromise not to alienate the property to third persons till the payment of the plaintiffs' debt is only a covenant not to create any interest in it in favour of others there is no expression of an intention to create an interest in the plaintiffs' favour. It is quite possible that a debtor, if he is unwilling to create any charge over his property, may enter into a covenant not to charge it in favour of others while declining to create a charge in favour of a particular creditor.”

With respect, I may observe that the term “an interest” has been used somewhat loosely. The distinction between a simple mortgage and a charge is that the former creates an interest in the property and the latter does not. The term “interest” as used here by their Lordships merely refers to the effect of the charge, which is that the chargee's debt gets, as regards the charged property, priority over other debts. The loose use of the term makes no difference to the reasoning with which I agree, namely, that unless the intention to make the property a security appears a charge is not created.

Reference has been made to Raja Sri Sri Shiva Prasad Singh v. Beni Madhab Chowdhury*, cases which are clearly distinguishable on the facts. In Murat Singh's case, the relevant words occurred in a usufructuary mortgage bond:

“In the case of the aforesaid creditor being, dispossessed of the holding in any way, in that case he shall realise his dues from my one-anna share in mauzas Dharwali and Gosainpur.”

The intention to make this property security for the debt is evident. The relevant words in Raja Sri Sri Shiva Prasad Singh's case are:

“This settled coal land, mines,………………… shall ever be regarded as a security for the payment of the rent and cesses due, together with interest thereon due to you I shall not be competent by the sale, gift, or remove the same, so long as the rent, etc., due to you will remain unpaid.”

Here, the property is expressly made security for the debt. This remark applies equally to the case of Gobinda Chandra Pal, where the relevant words are:

“That the properties specified in the schedule below shall be hypothecated for the realisation of the aforesaid money and that (we) the defendants shall not be able to create any incumbrance in the same.”

Maina v. Bachchi, which was also cited, relates to a consent decree for the payment of maintenance by the plaintiff and her representatives to the defendant. The relevant words in the petition of compromise were:

“If the plaintiff or her representatives should fail to pay to the defendant the aforesaid monthly sum at the end of each month, the defendant shall have power to recover monthly sum with interest at Re. 1 per cent, per mensem from the property decreed by instituting a suit as she should like.”

Here, too, the intention to make the property a security is manifest and, by adding the words “by instituting a suit”, the plaintiffs made it clear that they were creating a liability outside the ordinary liability of the judgment-debtor's property to be taken in execution of a decree for money.

Some support for the proposition contended for on behalf of the appellants is afforded by the case of Jawahir Mal v. Indomati. The relevant words occurred in a deed inter partes' on which the plaintiffs tried to base a suit for sale. They were:

“I will not transfer this property by way of sale, mortgage or gift, etc., so long as I do not repay this loan and if I do the transfer shall be void.”

Their Lordships Richards, C.J, and Banerji, J., differed as to the exact effect of the document, the former holding that it created a charge and the latter that the transaction amounted to a simple mortgage. Both, however, agreed that the intention of the executant of the document to make the property a security for the debt should be inferred. This inference was drawn by Their Lordships, however, on the special circumstances of the case. Banerji, J., pointed out that the opening portion of the document is meaningless except on the assumption that the person who engrossed the document omitted to insert the word “mortgage” or “hypothecate” and, in fact, the translators of the Court had inserted the word in order to give some meaning to the clause. This decision was followed by a Division Bench of Oudh Chief Court in Narain Dass v. Murli Dhar, where Their Lordships considered a stipulation in a consent decree in a money suit:

“That the defendant will not dispose of in any way his share in the Premier Aerated Company at Hazratganj until the satisfaction of the entire decretal amount.”

Their Lordships differred from the decision in P. Sivanna v. Venkatakrisanamurthi, apparently, on the ground that decision proceeded on a wrong idea that the creation of a charge requires the creation of an interest in the property. I have referred to this above. In my opinion, there is no reason to think that Their Lordships of the Madras High Court were under a wrong impression on this point. The term “interest” was used by them in a non-technical sense, and this use does not in any way affect the correctness of their reasoning. Coming back to the facts of Narain Dass v. Murli Dhar, it must be noted that the property in that case was not under attachment. By the agreement in the compromise, therefore, the defendant placed upon himself some restriction as regards that property, which did not exist from before. The agreement, therefore, was not like the agreement in the present case which imposed no new restriction either on the property or on the judgment-debtors. The remark I have just made applies also to the decision of a single Judge of the Nagpur High Court reported in Ganga Prasad v. Ratanchand, in which Niyogi, J., followed the decision in Jawahir Mal v. Indomati. The defendants judgment-debtors in a consent decree in the Court of Small Causes, Jubbulpore, agreed not to alienate certain immovable property “till satisfaction of this decree”. His Lordship pointed out that, under section 7 of the Code of Civil Procedure, the Small Cause Court is precluded from either issuing an injunction or attaching immovable property. He drew a distinction between a charge imposed by a decree of Court and a charge imposed by a private agreement. In view of the limitation on the powers of the Small Cause Court, he treated the case before him as governed by the principle relating to private agreements. From the facts of the case, it is clear that, when the agreement between the parties was entered into, there was no restriction by operation of law or action of the Court on the right of the defendants to transfer the property. Such restriction as was placed on that power subsequently was due to the agreement alone. For the reasons I have given, the three decisions just referred to do not affect the view which I have expressed about the effect of the compromise of 1928.

The conclusion to which I have arrived is supported by the decision of that learned Judge Varadachariar, J. in Ayyappa Naicher v. Thayammal. His Lordship was concerned with a compromise in an execution proceeding relating to property already attached in the proceeding. It specifically referred to the attachment and provided that the attachment should continue to remain in force. It went on to say that, if the instalments agreed on in the compromise were not duly paid, the decree-holder would be entitled to recover the full amount due under the decree by bringing the properties to sale without fresh attachment. His Lordship pointed out that the language used must be construed with reference to the circumstances as they stood at the time of the compromise, namely, that the property was already attached and formed the subject-matter of the execution proceeding. He referred to Order XX, rule 11(2), of the Code of Civil Procedure, which provides that, when a judgment-debtor is given an indulgence by way of instalments, the Court may grant that indulgence on such terms as to the attachment of the property or taking of security from him or otherwise as it thinks fit. This only carries out, he observes, the probable intention of the parties when the decree-holder is willing to oblige the debtor by postponing the payment. In the absence of express, words creating a security, he saw no reason to think that the parties would have preferred such protection as the creation of a security would have afforded to the advantages arising from the continuance of the attachment which had already been made. These are observations which apply exactly to the present case. The terms of the compromise with which we are concerned provided nothing beyond the liability already existing at the time when the compromise was entered into. Therefore, there is no reason to think that the intention was to substitute for the protection given by the Civil Procedure Code the protection afforded by the creation of a charge. In the course of his decision, his Lordship makes an observation which supports the distinction drawn by Niyogi, J., between private agreements and other agreements and thus furnishes an explanation, applicable to the decision in Jawahir Mal v. Indomati. His Lordship observes:

“It may be conceded that ordinarily when parties refer in a document to particular properties, as a source from which debt is to be paid or by the sale of which a debt is to be realised, there is some indication of an intention to make the property more directly liable than on a mere enforcement of a personal liability”.

His Lordship adds in words which apply exactly to the case before us:

“Where however, as in the present case, the facts recited in the document itself clearly show why the document refers to particular properties, and it also appears in what manner the properties are to be made available for the obligations arising under the document, it will not be right to ignore these circumstances and imply a kind of general intention to create security.”

An attempt has been made to distinguished the present case, from the reported cases on the ground that there, was here a combination of two rights given to the decree-holders, namely, a right under the compromise and a right by reason of the attachment of the property by the Civil Court. I have already explained that under the compromise the decree holders got nothing in addition to the rights they already had under the attachment, and this is one of the reasons which I have given for holding that no charge was created by the compromise.

I come now to the second point urged on behalf of the appellants, that they had a statutory right to redeem the simple mortgage and this right cannot be taken away from them by any transaction or litigation between third parties. The statutory, right is claimed by them under section 91, clause (f) of the Transfer of Property Act as it stood on the date of the compromise. The section then read:

“Besides the mortgagor, any of the following persons may redeem, or institute a suit for redemption of the mortgaged property:—

………………………………………………

(f) the judgment-creditor of the mortgagor, when he has obtained execution by attachment of the mortgagor's interest in the property……………”.

When the mortgage suit was instituted, this section stood in its present form, and the only clause which can possibly apply is clause (a):

“any person (other than the mortgagee of the interest sought to be redeemed) who has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same.”

It is not necessary for the purposes of the present case to decide whether section 91 in its original or in its amended form applies. We may assume that the original form of this section which expressly mentions the judgment-creditor who has obtained execution by attachment applies. It has been held in Baiju Lal Marwari v. Thakur Prasad Marwari that, even where the original form of section 91 applies, such a judgment-creditor is not a necessary party in a suit based on the mortgage. The correctness of this decision has been sought to be questioned on the ground that their Lordships did not consider the aspect of the matter which has been formulated as the second point urged on behalf of the appellants. A complete answer to this objection is furnished by the following passage from the judgment of Chatterji, J., at page 168 of the report:—

“There is a still greater difficulty in the way of the plaintiffs. Whatever rights they might have as attaching decree-holders, their attachment and with it those rights came to an end when they became the purchasers of the attached properties on the 9th of September 1918. After their purchase, they could no longer exercise their right of redemption as attaching decree-holders.”

Here, the right of the decree-holders to redeem the mortgage under the old section 91, clause (f), remained in existence till their purchase of the property in August 1931—I am assuming for the purpose of argument that the old section applies to the present case. When they became the purchasers of the property, however, that right was extinguished by their own act. After the purchase, they could only seek to redeem the mortgage as being the owners of the equity of redemption. But, as, their purchase was pendente lite, they acquired the property subject to the pending litigation and their interest was extinguished by the sale in execution of the mortgage decree.

In passing a reference was made to Mt. Fatima Begam v. Bansidhar. The decision in that case is set out in the following headnote:

“C, who held a simple money-decree against B, attached the property mortgaged by B in favour of A in execution of his decree before the institution of the mortgage suit by A, and purchased same in auction-sale held in execution of his decree after the institution of the mortgage suit, and subsequently A obtained a decree in the mortgage suit (in which C was not impleaded) and purchased the same property in execution of his decree but was resisted in taking possession by C.

Held: that A was entitled to the property purchased by him as against C, but C had the right to redeem the property and should have been made a party to A's suit”.

This is exactly contrary to the view taken in Baiju Lal Marwari v. Thakur Prasad Marwari. Their Lordships held that a person entitled under the old section 91(f) of the Transfer of Property Act to redeem a mortgaged property is a necessary party under Order XXXIV, rule 1, Civil Procedure Code. In the Patna case, however, it was pointed out that Order XXXIV, rule 1, speaks of persons “having an interest…… in the right of redemption” and they have given reasons for holding that this expression is not identical with “persons having the right to redeem”. I am bound by the previous decision of this Court, which accepted the view of the Calcutta and Madras High Courts in preference to that of the Allahabad High Court.

On the above findings, this appeal fails, and I do not feel called upon to consider a point of limitation urged on behalf of the defendants-respondents, which is that the plaintiffs have not obtained a sale certificate for their purchase on the 18th August 1931, that they have not obtained delivery of possession in pursuance thereof and have never been in possession of the property, and that, therefore, by the time they instituted the suit on the 24th April 1944, they had no subsisting interest in the property.

For the reasons, given above, I would dismiss this appeal with costs.

Lakshmikanta Jha, C.J:— I agree. The question whether a charge was created by “act of parties” under the petition of compromise depends upon the construction of the document itself. I read the document as a whole and construe the words in the context in which they have been used. It does not appear to me from the language used that there is any word or expression appearing in the four corners of the instrument itself from which it can be inferred that a charge was created by the parties on the properties under attachment. We were referred to some decisions, which have been discussed by my learned brother, where it was held on the interpretation of certain words that a charge had been created; but those decisions cannot be used by us as a guide in deciding what the true meaning of the words used in the compromise petition is. It is well settled that in construing a document two cardinal rules of construction have to be borne in mind:—

(1) In construing a written instrument the plain meaning of the express words is to be rigidly adhered to irrespective of the question of the intention of the parties. In elucidating this principle Lord Wensleydale in the case of Monypenny v. Monypenny has laid down the rule of construction thus:—

“The question is not what the parties to a deed may have intended to do by entering into that deed, but what is the meaning of the words used in that deed: a most important distinction in all cases of construction, and the disregard of which often leads to erroneous conclusions.”

(2) When the question is one of pure construction of a written instrument, decisions based upon the construction of another document, couched in similar but not the same language, are not binding as an authority. In support of this rule I may quote the observation of Jessel, M.R, in the case of Aspden v. Seddon:—

“No Judge objects more than I do to referring to authorities merely for the purpose of ascertaining the construction of a document; that is to say, I think it is the duty of a Judge to ascertain the construction of the instrument before him, and not to refer to the construction put by another Judge upon an instrument, perhaps similar, but not the same. The only result of referring to authorities for that purpose is confusion and error, in this way, that if, you look at a similar instrument, and say that a certain construction was put upon it, and that it differs only to such a slight degree from the document before you, that you do not think the difference sufficient to alter the construction, you miss the real point of the case, which is to ascertain the meaning of the instrument before you. It may be quite true that in your opinion the difference between the two instruments is not sufficient to alter the construction, but at the same time the Judge who decided on that other instrument may have thought that very difference would be sufficient to alter the interpretation of that instrument. You have, in fact, no guide whatever;…………… There is, first, document A, and a Judge formed an opinion as to its construction. Then came document B, and some other Judge has said that it differs very, little from document A—not sufficiently to alter the construction—therefore he construes it in the same way. Then comes document C, and the Judge there compares it with document B, and says it differs very little, and therefore he shall construe it in the same way. And so the construction has gone on until we find a document which is in totally different terms from the first, and which no human being would think of construing in the same manner, but which has by this process come to be construed in the same manner.”

He reiterated the same principle in the case of In re New Callao and put the proposition thus:—

“………Nothing is better settled than that the construction put upon an instrument by a Court of law or equity is not binding on another Court of law or equity, even of inferior jurisdiction, as regards the construction of an instrument couched in somewhat similar language.”

Collins, M.R, in the case of Foulger v. Arding, has also put the canon of construction thus:—

“It appears to me that a lamentable waste of judicial time and power is often involved in examining decisions with regard to the meaning of words which, with one context, are capable of one meaning, and, with another context, of another meaning.”

Therefore, bearing in mind these cardinal canons of construction, I find myself unable to agree with the contention of the appellant that the three items of properties mentioned in the petition of compromise were made security for the payment of the debt due to the appellant.

Appeal dismissed.

G.N.P