Chhaganlal Sakharam v. Chunilal Jagmal

Tyabji, J.:— The question in this appeal is whether an oral charge in favour of the appellants is to have priority over two mortgages by registered deeds in favour of the respondents. The appellants contend that their charge being prior in point of time ought to have priority of effect. The argument before us was that Section 100 of the Transfer of Property Act, refers to oharges as distinct from mortgages; that by reason of S. 9 of the Act, which provides that

“a transfer of property may be made without writing in every case in which a writing is not expressly required by law,”

and in the absence of any such provision in regard to a charge as is contained in S. 54 of the Act in regard to sale, in R. 59 in regard to mortgages, in S. 107 in regard to leases, in S. 118 in regard to exchanges, and in S. 123 in regard to gifts—charges may be created without writing; that if a charge can be created without writing, then Section 17 of the Registration Act, is inapplicable, and an oral charge may be created by which an interest in immovable property of the value of Rs. 100 and upwards may be vested without a registered document.

2. The argument was sought to be supported by reference to some of the cases, notably Kallappa v. Balwant (1) and Maina v. Bachehi (2) in which charges were referred to as creating interests in the property. In the cases referred to however, where an interest in the property was held to be created by a charge the charge had been made either by a registered document or a decree of the Court; and Section 17(2)(5) of the Registration Act, exempts decrees of the Courts from the provisions under which registered documents are required for the creation of interests in immovable property. A for the difficulty that arises in the way of the argument is that Section 100 of the Transfer of Property Act; restricts its own operation to such charges as do not amount to mortgages; and the learned advocate for the appellants admitted that if the charge in question created an interest in the property, it was indistinguishable from a mortgage. A charge is defined in the Oxford Dictionary as a liability to pay money laid upon a person or estate. Such a liability is created by every mortgage, so that every mortgage, includes a charge. But whether any particular charge is in such terms as to amount to a mortgage may sometimes be a difficult question. The matter has been referred to in Srinivasa Raghava Aiyangar v. Ranganatha Aiyangar (3), where a charge that creates an interest in property is differentiated from a mortgage deed by the fact that there is no parsonal covenant to pay in a mere charge; and in Shiva Prasad Singh v. Beni Madhab (4), the distinction has been made that in a charge there is no transfer of any interest in the property but merely an obligation imposed on the property with reference to the payment: that in a charge the property is made security for the payment, but so that no interest in the property is transferred to the charge holder. How difficult it is to assume that there may be a charge (whether or not including a personal covenant to pay) by which an interest is created in the property and yet the transaction does not amount to a mortgage, under Section 100 of the Transfer of Property Act—has perhaps become sufficiently apparent from the peons discussion. But it may be added that where the law requires a specified transaction to be in accordance with specified formalities, in order that particular legal results may follow, no Court will favour an endeavour to give to an identical transaction another name with the object of bringing about the particular legal results in question without observing the formalities specified by the law. If the transaction is exactly of the nature contemplated by the law which the law describes or otherwise refers to as a mortgage, if it has the same incidents, so that it cannot be distinguished from a mortgage, then the transaction cannot be treated as otherwise than a mortgage merely by calling it a charge: it cannot be created orally merely by calling it a charge, in spite of the fact that the law denominates transactions having such results as mortgages, and requires mortgages to be by registered deeds. As Lord Sumner put it, it is impossible to admit the common sense of maintaining an enactment which would prevent the purpose of the contract, while permitting the contract to stand as a contract: Annada Mohan Boy v. Gour Mohan Mullick (5).

3. The assumption therefore must be that there may be charges which create interests in property, but which are yet in some way (not at present specified) distinguishable from transactions which the law denominates mortgages. On this difficult assumption, it would follow that by reason of Section 9 of the Transfer of Property Act, there may be such a charge without a registered document. The appellants rely on this reasoning for contending that the oral charge in their favour must have the same effect as if it had been by a registered document; or, to put it in another form, that the absence of a registered document cannot affect their, charge because S. 9 recognizes oral transfers of property, and the priority of their transfer must then depend, under Section 48 of the Transfer of Property Act, upon the date of the creation of the transfer. Section 48 of the Transfer of Property Act, must however, be read subject to Section 48 of the Registration Act, which provides that

“all non-testamentary documents duly registered under this Act, and relating to any property, whether moveable or immovable, shall take effect against any oral agreement or declaration relating to such property, unless where the agreement or declaration has been accompanied or followed by delivery of possession.”

4. As there has been no delivery of possession in the present case, the exception may, for the present purposes, be disregarded. Thus, registered documents are to have priority over oral agreements (unless they come under the exception I which is at present irrelevant.) The argument in answer to Section 48 of the Registration Act was that priority is only given, as against an oral agreement: and an oral agreement is explained for the purposes of this answer as a bare agreement,—an executory act that has not been given effect to. The argument hardly needs any refutation. No section would be required for providing that a registered deed already given effect to-should have priority over a mere agreement to do something in the future. The Section obviously means that the oral agreement shall have effect subject to the registered document: that the effects-which the oral agreement is to bring about must be subject to the effects brought about by the registered document. Not to elaborate what seems-plain, I have not referred to the implications of the exception contained in the last clause of the section. When those implications are attended to, the argument becomes still more futile. Another argument was placed before us on behalf of the appellants in connexion with. Section 100 of the Transfer of Property Act. This section has been amended by Section 50 of the Transfer of Property (Amendment) Act, 20 of 1929, by the addition of the words:

“And save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom, such property has been transferred for consideration and without notice of the charge.”

5. It is argued that taking the view which has been expressed in the earlier part of this judgment is in effect enforcing the amended S. 100 against the parties; and that inasmuch as it was necessary to make this amendment it follows that the law must have been different prior to the amendment, and that as there are conflicting decisions under S. 100, we ought rather to give effect to those decisions which cannot with the amended Act than those which are in accordance with it; in particular that no notice of the charge is needed for its being enforced. If, on the other hand, the amendment is applicable then there are very clear findings against the appellant. It was contended for the respondent that the amendment of S. 100 is given retrospective effect by Act 20 of 1929, because the amendment is made by S. 50 of the amending Act, and S. 63 of that Act, which precludes-retrospective effect being given: to certain sections, does not (it is argued) in-elude S. 50 amongst those sections that the not to have retrospective effect; that consequently the amendment in question is impliedly given retrospective effect. The argument is supported by the following remarks of B.J Wadia, J., in Suleman v. Patell (6) (p. 727 of 35 Bom. L.R):

“Section 53-A deals with the doctrine of part performance of a contract, and is added by Section 16 of the Transfer of Property (Amendment) Act (20 of 1929). S. 68, Act 20 of 1929 lays down that certain amendments made by that Act shall not be deemed to affect the terms or incidents of any transfer of property before 1st April 1930. But S. 16 which introduces S. 53-A is not one of them, and therefore by implication S. 53-A can be said to have retrospective effect.”

6. These remarks and the argument based on it overlook that S. 63 falls under two main heads. First the sections enumerated in the first four lines of S. 63 are debarred from having the effects stated in Cls. (a), (b), (c) and the first sentence of Cl. (d). Secondly, all other provisions of the Act are debarred from having the effects referred to after the words “and nothing in any other provision” in Cl. (d). It would have been conducive to clarity if these latter words of Cl. (d). had been marked of as forming sub-s. (2), S. 63; and all the earlier portion as sub-S. (1). Before anything is to be implied from the section, its express provisions much be exhausted. The express provisions fall under two heads; those relating to the enumerated sections and those to the other provisions of the Act. It seems to have become unnecessary to divide the sections under two heads, as it was necessary (stating broadly) first to deal with provisions of the Act relating to transfers, and secondly with provisions relating to proceedings and remedies. Referring to the sections or portions of sections enumerated in the first four lines of S. 63 as “the enumerated provisions” and all other provisions of the Act as “the unenumerated provisions,” the scheme of S. 63 seems to be as follows:

(1) The enumerated provisions are to have no effect in regard to the terms or incidents of transfers of property, made or effected, or the validity, invalidity, effect or consequence of anything already done or suffered, or any right, title, obligation or liability already acquired, accrued or incurred, before 1st April 1930; or any remedy or proceeding in respect of such right, title, obligation or liability, already acquired, accrued or incurred, before 1st April 1930. (2) Nothing in the unenumerated provisions shall render invalid or in any way affect anything already done before 1st April 1930, in any proceeding pending in a Court on that date; and any such remedy and any such proceeding as is “herein” referred to may be enforced, instituted or continued, as the case may be, as if the amending Act had not been passed. The amendment to S. 100 is not included amongst the enumerated provision. Therefore the portion of S. 63, which applies to it, is that which is secondly mentioned above. Nothing is sought in the present proceedings to be rendered invalid, nor is anything sought to be in any way affected which had been already done before 1st April 1930, in any proceeding pending on that date in a Court. Thus the first part of the secondly-mentioned portion of S. 68 does not affect the present case.

7. The last part of the secondly-mentioned portion of S. 63 above, speaks of “remedies and proceedings referred to herein”. This must presumably mean referred to in Cl, (d). That clause speaks of remedies in its first sentence; and of proceedings both in the first and second sentences. Therefore stated fully the final sentence of Cl. (d) means that notwithstanding the unenumerated provisions:

“Any remedy or proceeding in respect of a right, title, obligation or liability already acquired, accrued or incurred before 1st April 1930, and any proceeding pending in a Court on that date may be enforced, instituted or continued as the case may be, as if ‘this’ Act (20 of 1929) had not been passed,”

8. The appellant claims a remedy in respect of a right alleged to have accrued to him before 1st April 1930. He is therefore entitled notwithstanding the unenumerated provisions to have his remedy (if any) enforced as if Act 20 of 1929 had not been passed. Secondly, these proceedings were pending in a Court on that date; therefore he is entitled to have the proceedings continued notwithstanding the unenumerated provisions as if the Act had not been passed. We cannot, accordingly, aecept the argument that we must decide this case in accordance with the amended S. 100. The remarks in Suleman v. Patell seem to be in oversight of the latter portion of S. 63, Clause (d). On the basis that the amended Act does not apply, the further argument addressed to us on behalf of the appellant took a double form; first that notice was unnecessary in order that the charge may be enforced, and, secondly, that there was constructive notice, as there is evidence that the mortgagees had been told that the money was borrowed from them for paying of debts. Thia, it was argued, put the mortgagees on inquiry: that it threw the burden on the mortgagees of inquiring whether there was an oral charge on the property. The learned Judge has dealt with the evidence on this point. We agree with the view he has taken, and are of opinion that there was no constructive notice.

9. The argument that notice was not necessary can only have any force if the provisions of Section 48 of the Registration Act are overlooked.

10. We have already dealt with that aspect of the case. The question whether, if there had been notice the appellant could have been in a better position does not arise. The final point argued before us was that defendant 2 could not succeed in the suit out of which the appeal arises, because of O. 21, R. 63, in as much as plaintiff and defendant 2 had both unsuccessfully made claims or objections in execution proceedings asserting the priority of their mortgages against the oral charge of the appellant. Their claims or objections being disallowed, the plaintiff alone brought the suit O. 21, R. 63, provides that the party against whom an order is made may institute a suit to establish the right which he claims to the property in dispute, but subject to the result of such suit, if any, the order shall be conclusive. It is argued that defendant 2 not having brought any suit the order is conclusive against him. We cannot accept this unmeritorious argument. It is not at all clear that even technically defendant 2 may not be brought under the terms of the rule. For the plaintiff in the suit refers to and admits defendant 2's mortgage, and claims that the plaintiff's mortgage should be held subject to the mortgage in favour of defendant 2, but should be given priority over the oral charge in favour of defendant 1. Therefore the plaintiff did institute a suit as required by R. 63, and his claim implied an adjudication in favour of defendant 2. But assuming that technically defendant 2 cannot be literally brought under the terms of R 63, there is no reason why he should be driven to another suit seeing that the plaintiff's claim was on all fours with his own, and that the plaintiff and he were parties to the suit against defendant 1. The object of R. 63 is clear,—that the correctness of the order made when the claim was investigated should be reconsidered (if at all) in a suit brought within a year. This has been done. There would have been no object in defendant 2 now bringing a second suit. Plaintiff and defendant 2 might no doubt have both been plaintiffs. If this point had been taken earlier defendant 2 could have been made plaintiff under O. 1, R. 10(2). If there had been any substance in the point, we should have done so in this Court. In our opinion, this appeal should be dismissed with costs.

R.K

11. Appeal dismissed.