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Obla Sundarachariar And Others v. Narayana Ayyar And Others
Structured Summary of the Opinion (Lord Tomlin)
Factual and Procedural Background
The suit was instituted in 1921 in the Court of the Subordinate Judge at Madura by Samoo Battar, a money-lender, to enforce an equitable mortgage by deposit of title-deeds to secure Rs. 60,000 (including an existing debt) and to obtain a personal judgment to the extent the security proved insufficient. The defendants were members of a joint family firm trading at Madura. The present appellants are assignees of the joint family firm's interest in the property comprised in the title-deeds and were added as additional defendants.
On 3 November 1923 the Subordinate Judge made a mortgage decree for the amount claimed and costs, directed sale in default of payment, and gave liberty to apply for a supplemental decree against family properties and the members personally if the sale proceeds were insufficient. The appellants appealed to the High Court, which dismissed the appeal on 26 October 1928. The appellants obtained special leave to appeal to His Majesty in Council. The respondents are the legal representatives of the deceased plaintiff.
The central factual dispute concerns a written memorandum (and an accompanying promissory note) dated 14 March 1921, prepared in connection with a transaction at Madras in which title-deeds of five properties were deposited and a further advance was made. The manager of the joint family firm (Krishnaswami Ayyar) signed both a promissory note for Rs. 60,000 and a memorandum listing the title-deeds; the promissory note was unsigned by witnesses, while the memorandum was witnessed. The deeds were inspected, and money (a cheque and cash) was paid to the manager. No evidence was given by the defendants; the plaintiff called witnesses and tendered documents.
Legal Issues Presented
- Whether, having regard to its true construction and the circumstances in which it was created and delivered, the memorandum is an instrument which "purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest" of the value of Rs. 100 or upwards in immovable property within the meaning of S. 17 of the Registration Act, 16 of 1908, thereby requiring registration.
- Whether, in the context of a deposit of title-deeds effected in Madras (where S. 59 of the Transfer of Property Act provides an exception), there was a mortgage capable of legal proof despite the existence of an unregistered memorandum.
Arguments of the Parties
Appellants' Arguments
- The appellants relied on their Lordships' earlier decision in Subramanian v. Lutchman (AIR 1923 PC 50 etc.), arguing that the memorandum in the present case should be treated as embodying the agreement between the parties (i.e., amounting to the bargain) and therefore, as unregistered, would be inadmissible and fatal to the plaintiff's claim.
Respondents' Arguments
The opinion does not contain a detailed account of the respondents' (plaintiff's representatives') separate legal arguments; the factual narrative and the plaintiff's evidence are described, but no discrete list of legal contentions advanced by the respondents is set out in the opinion.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Shaw v. Faster, [1872] 5 HL 321 (reported citations: 42 LJ Ch 49, 27 LT 281, 0WR 907) | Illustrates the rule that where parties have put their agreement into writing, oral proof cannot be substituted for the written evidence of that contract (i.e., a written agreement requiring registration cannot be proved by oral evidence). | The court used this authority to explain that while an unregistered written agreement cannot be proved by oral evidence, where there is no written agreement (i.e., the memorandum does not itself embody the contract), the intent to create a security by deposit of title deeds may be evidenced by oral as well as written evidence, especially given the T.P. Act exception for deposits in Madras. |
| Subramanian v. Lutchman, AIR 1923 PC 50 (=71 IC 650 =50 IA 77) | Held that the memorandum in that case embodied the agreement between the parties and, being unregistered, could not be produced in evidence; thus it was fatal to the plaintiff's claim. | The appellants relied upon this case. The court distinguished it on the ground that the memorandum in Subramanian did embody the bargain, whereas the memorandum in the present case did not; therefore the decision in Subramanian did not aid the appellants. |
| Kedarnath Dutt v. Shamlall Khettry, 11 Beng LR 405 (=20 WR 150) | Contains the passage that "oral proof cannot be substituted for the written evidence of any contract which the parties have put into writing" and that if a memorandum is of such a nature that it is the parties' repository and the appropriate evidence of their agreement, it is the instrument by which an equitable mortgage is created and falls within S. 17. | The court (through Lord Tomlin) noted that Lord Carson quoted this passage with approval in Subramanian. The passage was used to articulate the principle that a memorandum will be within S. 17 only if, on its face and from surrounding circumstances, it legitimately appears to be the agreement between the parties regarding the deposit. |
Court's Reasoning and Analysis
The court identified the statutory framework: S. 17 of the Registration Act requires registration of instruments that purport or operate to create, declare, assign, limit or extinguish any right in immovable property of the value of Rs. 100 and upwards, and S. 49 renders unregistered documents of that class inadmissible as evidence or ineffective. It also noted S. 59 of the Transfer of Property Act, providing that where principal money secured is Rs. 100 or upwards, a mortgage generally requires a registered instrument attested by two witnesses, but that the section does not invalidate mortgages effected by delivery of title-deeds in specified towns including Madras.
The court posed the central question whether the memorandum, by its true construction and the circumstances of its creation and delivery, was such an instrument as to require registration under S. 17. It examined the memorandum "in vacuo" and found that its plain meaning was simply a record listing the deeds delivered as security and stating that they were delivered "as security" pursuant to an agreement made in person. The memorandum did not set out the terms of the agreement or indicate the nature of the obligation secured; it could equally have been security for money or for some other obligation.
The court then considered whether surrounding circumstances altered that meaning. It concluded they did not: the fact that the memorandum was prepared, signed and handed over to the plaintiff before the balance was advanced (even if it was a condition precedent) did not change the character of the memorandum from a mere list of deposited documents into a document embodying the contract. The memorandum did not embody the contractual terms and therefore did not purport or operate to create or declare any right, title or interest in the properties listed.
The court addressed the appellants' reliance on Subramanian v. Lutchman, acknowledging that in Subramanian the memorandum was held to embody the agreement. Lord Tomlin (their Lordships) distinguished Subramanian on its facts, and relied on the principle (as stated in Kedarnath Dutt and cited in Subramanian) that a memorandum will amount to the contract—and therefore fall within S. 17—only if it on its face embodies the terms and is signed and delivered in such circumstances as legitimately to lead to the conclusion that it was intended by the parties to be the agreement. Applying that test, the present memorandum did not qualify.
Accordingly, the court found that the memorandum was merely a written record of the particulars of deeds deposited and did not require registration under S. 17. On that basis the plaintiff's claim based on the deposit and the mortgage was capable of proof and the appellants' contention that the unregistered memorandum made the claim invalid was rejected.
Holding and Implications
HOLDING: The appeal was dismissed. The court held that the memorandum did not purport or operate to create, declare or assign any right, title or interest in the immovable properties listed and therefore did not require registration under S. 17 of the Registration Act; the appellants' reliance on Subramanian v. Lutchman was distinguishable on the facts.
Implications: The direct consequences are that the plaintiff's equitable mortgage by deposit of title-deeds was not defeated by the existence of the unregistered memorandum and the decree in favour of the plaintiff (and against the appellants as assignees of the joint family firm's interest) is sustained; the appeal by the appellants fails and was dismissed with costs. The opinion distinguishes earlier authority where a memorandum itself embodied the bargain, but does not purport to lay down a broader novel precedent beyond applying existing principles to the facts; no wider principle beyond the court's application to these facts is claimed in the opinion.
Appeal dismissed.
Lord Tomlin.
The suit out of which this appeal arises was instituted in 1921 in the Court of the Subordinate Judge at Madura by one Samoo Battar, a money-lender doing business in Palghat, Madras, and other places. He claimed in effect to enforce an equitable mortgage by deposit of title-deeds to secure Rs. 60,000 and interest and to recover a personal judgment for the amount of the mortgage debt so far as the security should prove insufficient.
The defendants to the suit were the members of a joint family firm trading at Madura. The present appellants, who are assignees of the interest of the joint family firm in the property comprised in the title deeds in question, were brought into the suit as additional defendants.
On 3rd November 1923, the Subordinate Judge made the usual mortgage decree for the amount claimed and costs with a direction for sale in default of payment and with liberty for the plaintiff if the proceeds of sale of the property proved insufficient to apply for a supplemental decree against the family properties of the members of the joint family firm and also against the members of the joint family firm personally. The present appellants appealed to the High Court. On 26th October 1928, the High Court dismissed the appeal with costs. The appellants obtained special leave to appeal to His Majesty in Council. The respondents to the appeal are the legal representatives of the plaintiff who is dead. The question raised by the appeal is whether there is any mortgage capable of legal proof having regard to the fact that there was a written memorandum relating to the matter which was not registered under the Registration Act 16 of 1908. The facts are to be gathered from the documents and the evidence of witnesses called by the plaintiff. No evidence was adduced by the defendants. The story is in substance as follows :
The joint family firm owed the plaintiff Rs. 36,809-0-10 and wanted a further advance so as to make up a total debt of Rs. 60,000. Their manager, Krishnaswami Ayyar, entered into negotiations with the plaintiff through the plaintiff's son and eventually came to Madras to deal with the matter. Security was demanded. The deeds of two properties were offered but rejected as inadequate. Then the deeds of three additional properties were offered. The five properties were considered adequate security. The transaction was completed on 14th March 1921, between 4 p. m. and 6 p.m., in the house of the plaintiff's son. There were present the plaintiff, his son, the manager of the joint family firm, and one Doraisami.
Before the plaintiff arrived on the scone the manager had already handed the deeds to the plaintiff's son with two documents which he had written out and signed, namely : (1) A promissory note for Rs. 60,000 payable on demand with interest at one per cent per mensem, and (2) a memorandum which consisted of a list of the title deeds, with the following introductory words :
"Written to E. N. A. Samoo Battar by Krishnaswami Ayyar, of S. V. Ramasami Ayyar and brothers. As agreed upon in person I have delivered to you the under mentioned documents as security."
Both documents were dated 14th March 1921. The promissory note was signed by the manager but was not witnessed. It showed on its face that Rs, 60,000 was made up of Rs. 36,809-0-10 amount already due and Rs. 23,190-15-2 "amount received in cash today."
The memorandum was signed by the manager and witnessed by Doraisami. Upon the arrival of the plaintiff his son showed him the deeds and the promissory note and the memorandum and was instructed by the plaintiff to examine the deeds to see whether they were in order.
When this examination had been completed and the deeds were found to be in order, the deeds, the promissory note, and the memorandum were put away by the plaintiff's son in a safe and a cheque for Rs. 23,115 together with cash to make up Rs.23,190-15-2, was handed to the manager.
Under S. 17, Registration Act, registration is required of : (a) instruments of gift o immovable property, and (b) 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 Rs. 100 and upwards in immovable property. By s. 49 of the same act it is provided that no documents required by S. 17 to be registered shall (a) affect any immovable property comprised therein; (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.
It is necessary also to bear in mind S. 59, T. P. Act, which provides that where the principal money secured is Rs. 100 or upwards a mortgage can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses, but that nothing in the section now being cited shall be deemed to render invalid mortgages made in the towns of Calcutta and Madras, and certain other towns therein mentioned by delivery to a creditor or his agent of documents of title to immovable property with intent to create a security therein.
Now this transaction took place in Madras and did not therefore require a registered instrument under S. 59, T. P. Act. The question which falls to be determined is whether the memorandum having regard to its true construction and the circumstances in which it came into existence and passed into the hands of the plaintiff is an instrument which purports' or operates 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 Rs. 100 and upwards to or in immovable property.
If the memorandum is considered in vacuo its meaning is plain. It records particulars of documents which, it states, have been delivered as security in pursuance of an agreement reached in an person. It does not state what were the terms of the agreement or indicate the nature of the matter for which the deeds were deposited as security. So far as anything disclosed by the memorandum is concerned the security may have been for money lent or to be lent or for the performance of some obligation the breach of which would sound in damages.
Considered in this light the memorandum, in their Lordships' judgment, merely records particulars of deeds the subject of a deposit. Is there then anything in the circumstances connected with the creation of the memorandum or in the way in which the parties dealt with it which permits or requires some other meaning or effect to be given to it?
The answer, in their Lordships' judgment, must be in the negative. Even if it was a condition of the advance that the memorandum was to be given, the fact that the memorandum was prepared, signed and handed over to the mortgage before the advance of the balance of the money to be secured by the deposit could not alter the nature and meaning of the document. It was and remained a list of the documents deposited and nothing more. It did not embody the terms of the agreement between the parties. Upon this view of the matter apart from authority it would in; their Lordships' opinion be impossible to hold that the document purported or operated to create or declare any right, title or interest in the property and required to be registered under S. 17, Registration Act.
In this connexion it may be observed; that though an agreement embodied in at written document, requiring registration under S. 17, Registration Act and not so registered cannot be proved by the written document (see S. 49, Registration Act) or by oral evidence : see Shaw v. Faster, [1872] 5 HL 321=42 LJ Ch 49=27 LT 281=0WR 907, yet where there is no written; agreement there seems no reason why the intent to create a security by deposit of title deeds under the exception provided for in S. 59, T. P. Act, should not, be evidenced by written as well as by oral evidence. It is however, urged by: the appellants that the present case is. covered by the decision of their Lordships' Board in Subramanian v. Lutchman, AIR 1923 PC 50=71 IC 650=50 IA 77=1 Rang Cal 338(PC) and that the appeal should succeed.
The memorandum in that case was hold to embody the agreement between the parties and is in their Lordships view different in that respect from the memorandum hare under consideration. Lord Carson, in delivering the judgment of the Board quoted with approval a passage-from the judgment of Couch C. J., in Kedarnath Dutt v. Shamlall Khettry, 11 Beng LR 405=20 WR 150.
That passage is in the following terms:
"The rule with regard to writing 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 S. 17, Registration Act."
Ultimately Lord Carson summed up the conclusions of the Board in these words:
"Their Lordship have no doubt therefore that the memorandum in question was the bargain between the parties and that without its production in evidence the plaintiff could establish no claim and as it was unregistered it ought to have been rejected"
While their Lordships do not think that the language of Lord Carson conveysor was intended to convey the meaning that no memorandum relating to a deposit of title-deeds can be within S. 17, Registration Act, unless it embodies all the particulars of the transactions 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.
Having regard to the view already expressed of one effect of the memorandum now under consideration no comfort is to be found for the appellants in the case upon which they relied. Their Lordships reach the conclusion that the memorandum was not other than a written record of the particulars of deeds the subject of an agreement constituted in fact by the act of deposit and the payment of the money and that it neither purported nor operated to create or declare any right, title or interest in the property includes in the deeds, with the result that it did not require registration. In their Lordships' opinion the appeal fails and should be dismissed with costs. Their Lordships will humbly advise His Majesty accordingly.
Appeal dismissed.
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