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Kesar Chand And Others v. Uttam Chand And Others

Privy Council
Apr 30, 1945
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Smart Summary (Beta)

Structured Summary of the Opinion (Uttam Chand in Nand Lal v. Hans Raj and others)

Factual and Procedural Background

This appeal arises from a decree of the High Court of Judicature at Lahore (16 May 1941) affirming a decree of the Subordinate Judge, First Class, Montgomery (29 May 1939), which dismissed the plaintiffs' suit. The plaintiffs (the sons and grandson of Uttam Chand) sought to set aside a sale and obtain possession of family properties that had been sold in execution of a decree obtained by respondent Nand Lal.

Background facts (as stated in the opinion):

  • Uttam Chand and Dogar Chand were separated Hindu brothers. Uttam Chand, his sons Kesar Chand and Ram Lal, and grandson Chand Kishan formed a joint Hindu family.
  • Dogar Chand died leaving a widow and three minor sons (Hans Raj, Sohan Lal and Des Raj). Respondent Nand Lal obtained a preliminary mortgage decree (1 July 1927) against the minor sons, represented by their guardian Uttam Chand, arising from a mortgage by their mother for Rs. 7,748; the decree was made final on 21 January 1928.
  • The minors, through their guardian Uttam Chand, appealed to the High Court and sought a stay of execution. Coldstream J. granted a stay on 11 May 1928 but ordered that the property should not be sold "if the petitioners can furnish security in the form of a charge upon immovable property" to secure the decree-holder against loss.
  • Uttam Chand executed a security bond on 31 July 1928 stating "I hereby stand as surety for Hans Raj and others, minors, judgment-debtors," and agreeing that his movable and immovable properties listed would be liable to make good any deficiency in the event the appeal failed. The bond listed some movables (though movables were not called for) and three immovable properties.
  • The appeal was compromised and a mortgage decree in terms of the compromise was passed by the High Court, providing that the property should remain under attachment and that "the security furnished by the surety shall also stand."
  • When the mortgage debt was not paid, execution was taken and the mortgaged property was sold. The sale did not realise the whole decree debt; additional family properties (only one of which fell within the literal scope of the security bond) were subsequently sold in execution. Uttam Chand had transferred most of the properties listed in his bond before liability arose under the bond.
  • The Subordinate Judge dismissed the appellants' suit; the High Court affirmed, holding that on proper construction Uttam Chand had undertaken personal liability and that the execution could not be reopened at that stage.

Legal Issues Presented

  1. Whether the security (surety) bond executed by Uttam Chand on 31 July 1928 creates or gives rise to a personal liability on Uttam Chand.
  2. Whether the sale of the appellants' ancestral properties in execution of the decree — in enforcement of the security bond — is valid and binding on the appellants.

Arguments of the Parties

Appellants' Arguments (as presented in the opinion)

  • Counsel for the appellants, Mr. Subba Rao, contended that Uttam Chand was not personally liable under the terms of the security bond and therefore there was no debt due by him such as would justify sale of family (ancestral) property.
  • He argued that unless a personal liability of Uttam Chand was established, properties other than those specifically covered by the bond could not be validly sold.

Respondents' Arguments (as presented in the opinion)

  • Sir Thomas Strangman, for the respondents, argued that the opening phrase "I stand surety for Hans Raj and others" should be read as "I promise to pay" and thus imports personal liability on Uttam Chand.
  • Respondents further urged: (a) a bond in the appropriate form (e.g., App. G, Civil PC) would provide for personal liability and the order for security should be construed with that form in mind; (b) inclusion of movable property suggested an intention to assume personal liability; and (c) even if there was no original personal liability, Uttam Chand's subsequent transfer of major portions of the property included in the bond made him personally liable (i.e., by impairing the security).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Raja Raghunandan Prasad Sing v. Raja Kirtyanand Singh, (1932) 19 AIR 1932 PC 131; 186 IC 629 (PC) The construction of a security bond executed pursuant to a court order must be considered in the light of the order directing security to be given. The court relied on this precedent to emphasise that Uttam Chand's bond should be read against Coldstream J.'s order requiring "security in the form of a charge upon immovable property," supporting the conclusion that the bond created only a charge on specified properties and did not impose personal liability.

Court's Reasoning and Analysis

The court's analysis proceeded in a stepwise manner, grounded primarily in textual construction of the bond and the contemporaneous court order that required security:

  1. Primary issue: The court emphasised that the first question is whether the security bond imposes any personal liability on Uttam Chand; absent such personal liability, unsecured family property could not validly be sold in execution.
  2. Construction of the bond: Although the operative portion begins "Hence I hereby stand as surety for Hans Raj and others," the court found that the immediately following clause — "and agree that . . . my moveable and immovable properties detailed hereunder shall be liable" — qualifies and limits the earlier phrase, confining liability to the properties specifically described in the bond. Thus, the instrument created a charge on the listed properties rather than an unlimited personal obligation.
  3. Contextual interpretation: The court read the bond in the light of Coldstream J.'s stay order, which expressly required security "in the form of a charge upon immovable property." Applying the principle from Raja Raghunandan Prasad Sing v. Raja Kirtyanand Singh, the court held that the bond must be construed in the context of the order that called for a charge on immovable property. This supported the conclusion that Uttam Chand's obligation was limited to the assets described as security.
  4. Rejection of alternate arguments:
    • The argument that the bond should be read as imposing personal liability because the appropriate form (App. G, Civil PC) would so provide was rejected: the court noted the order was clear and the document had to be construed by its own terms and in the light of the specific court order.
    • The inclusion of movables in the list did not, ipso facto, create personal liability; the terms of the document did not impose such liability and there was no evidence as to why movables were included.
    • The contention that Uttam Chand became personally liable because he transferred much of the property listed in the bond was disallowed. The court observed it was not made clear how a charge-holder could, in execution of a decree, avail himself of the mortgagee's statutory right to sue for the money (S.58, T.P. Act) without resorting to a suit. The court also expressed doubt whether the security had in fact been impaired by Uttam Chand's conduct.
  5. Pious obligation doctrine: The court explained that to make ancestral property liable under the doctrine of pious obligation, there must in truth be a debt due by the father. Here, the bond was executed to secure a debt due from third parties (the minor sons), not a debt due by Uttam Chand personally. Therefore, the doctrine of sons' pious obligation to pay the father's debt could not be invoked to bind ancestral property.
  6. Procedural observation regarding the executing court: The High Court had relied in part on the fact that the executing court had acted on the assumption of personal liability by Uttam Chand and that this assumption had not been directly challenged during execution. The Privy Council observed that the sons and grandson nonetheless retain a valid right to challenge that assumption by instituting a suit; the fact that the executing court proceeded on an assumption did not preclude later examination of whether personal liability existed.

Holding and Implications

APPEAL ALLOWED.

Holding (direct orders given by the court):

  • The decrees of the High Court and the Subordinate Judge are set aside.
  • It is declared that the security bond dated 31 July 1928 executed by Uttam Chand in Nand Lal v. Hans Raj and others is not binding on the appellants (Uttam Chand's sons and grandson) nor on the properties comprised therein.
  • The sale proceedings in execution of the decree relating to the joint family (ancestral) properties described in para. 4 and list A of the plaint are declared null and void.
  • The purchasers at the auctions (Nand Lal and Gehla Ram) and the alienees of Nand Lal (defendants 4 to 9) acquired no title to the said properties.
  • Each of defendants 2 to 9 is ordered to put the appellants and defendant 1 in possession of the properties which they possess; in respect of defendant 2 this is subject to payment of Rs. 646-5-0 (discharge by Nand Lal of two mortgages).
  • Defendants 2 to 9 are ordered to pay the costs of the appeal and the costs incurred in the High Court and in the Subordinate Judge's Court.

Additional practical implication noted by the court:

  • Although the appellants alleged deprivation of possession and sought an account of profits, the court observed that any claim for profits or account should be pursued in a separate suit; those rights are not resolved by these proceedings and are not barred by this decision.

The opinion does not purport to lay down a broader novel rule of law beyond the application of established canons of contractual/constructional interpretation and the existing authorities cited; its effect is primarily to restore possession and defeat the particular execution sales complained of in these proceedings. The court concluded by advising His Majesty accordingly.

Disposition: Appeal allowed.

Show all summary ...

Sir Madhavan Nair.-

This is an appeal from a decree of the High Court of Judicature at Lahore dated 16th May 1941, which affirmed a decree of the Court of the Subordinate Judge, First Class, Montgomery, dated 29th May 1939, and dismissed the plaintiffs' suit.

The appeal arises out of a suit instituted by the plaintiff's-appellants before the Board-for setting aside the sale and for possession of the properties mentioned in the plaint which were sold by Court in execution of a decree, by reason of a surety bond executed by their father Uttam Chand in the circumstances mentioned below. The properties in dispute have been found to be ancestral.

The main question arising for decision in this appeal is whether the above-mentioned surety bond creates or gives rise to a personal liability on Uttam Chand.

Uttam Chand and Dogar Chand, shown in the pedigree given below, were two separated Hindu brothers. Kesar Chand and Ram Lal-appellants 1 and 2-are the sons of Uttam Chand; Chand Kishan-appellant 3-is the son of Kesar Chand and grandson of Uttam Chand. Uttam Chand and the three appellants constituted a joint Hindu family. Dogar Chand died leaving a widow, and three minor sons, Hans Raj, Sohan Lal, and Des Raj.

On 1st July 1927, respondent 2, Nand Lal, obtained a preliminary mortgage decree against the minor sons of Dogar Chand, represented by their guardian Uttam Chand, on the basis of a mortgage executed by their mother, for Rs. 7748, with interest and costs. This decree was made final on 21st January 1928. Hans Raj and his brothers through their guardian appealed to the High Court against the decree, and prayed for a stay of the execution of the proceedings which had been taken by the decree-holder. The stay asked for was granted by Coldstream J. who passed the following order on 11th May 1928. :

"Mr. Anant Ram [Counsel for Nand Lal] asks that his clients may in any case be secured by a charge upon immovable property against loss if the sale is stayed. I think this is a reasonable argument and, having in view all the circumstances, I order that the property be not sold if the petitioners can furnish security in the form of a charge upon immovable property to the satisfaction of the executing Court for paying to the decree-holder in the event of the failure of their appeal, the amount by which the price fetched by the mortgaged property when sold under the decree falls short of the amount then found due to the decree-bolder under the provisions of the final decree . . . ."

Thereupon Uttam Chand executed a security bond on 3lst July 1928, in the following form, after stating that the High Court, had called upon him to file a security bond to the effect that if the decree money and costs, etc., are not recovered in full from the land he would be liable to make good the deficiency:

"Hence I hereby stand as surety for Hans Raj and others, minors, judgment-debtors, and agree that in the event of the appellate Court's decision being against the judgment-debtors, my moveable and immovable properties, detailed hereinafter, shall be liable for making good the deficiency, if the sale proceeds of the hypothecated property are not sufficient to meet the demand, i. e., the amount which may then be found due from the judgment-debtors according to the decision."

The above statement is followed by a list of some items of moveable property, though their security was not called for, and three items of immovable property.

The appeal before the High Court was compromised, and the Court passed a mortgage decree in terms of the compromise, providing that the property should remain under attachment and that "the security furnished by the surety shall also stand."

As the mortgage debt was not paid in time, the decree-holder took out execution and had the mortgaged property sold. As the decree debt was not realised in full by the sale, the four items of property involved in the suit, which included only one item of secured property, were sold in execution, as before his liability had occurred Uttam Chand had transferred almost all the properties included in the security bond. As stated by the Subordinate Judge,

"it is common ground between the parties that the whole of the property in dispute is outside the scope of the security bond executed by Uttam Chand excepting the house which was purchased by Gehla Ram, defendant 3."

Barring this house, the other properties were purchased by Nand Lal, the decree-holder and respondents 4 to 9 have purchased different plots of land from him after the execution sale had been confirmed in his favour by the executing Court. It is admitted that Nand Lal has paid Rs. 646-5-0 in discharge of two mortgages on the land purchased by him in the course of the execution.

Their Lordships will now proceed to consider whether the sale of the properties in dispute found to be ancestral, in enforcement of the security bond executed by Uttam Chand, is valid in law and binding on the appellants, his sons and grandson. The liability of the appellants is sought to be based on the pious obligation imposed on a Hindu son to pay his father's debts. In this connexion it may be stated that the appellants did not allege that the debt said to have been incurred by Uttam Chand for which the properties have been sold is an immoral one, nor did the respondents allege that it was raised for the benefit of the family.

The Subordinate Judge held that the security bond was an instrument of charge only and did not create any personal liability, that Uttam Chand had laid himself open to personal liability by reason of his having admittedly transferred a major portion of the properties included in the bond, that the sale of properties not covered by the security bond was justified by the principle expressed in S .68 (1) (c), TP Act, which says that "the mortgages has a right to sue for the mortgage money" . "where the mortgagee is deprived of the whole or part of his security by or in consequence of the wrongful act or default of the mortgagor" and that he was competent to charge family property by the execution of the security bond as the rule of Hindu law forbidding alienations of family property or the creation of charges thereon except for family necessity or for an antecedent debt of the father did not apply to charges created, by the father as surety. In the result, he dismissed the appellants' suit. The learned Judges of the High Court disagreeing with the Subordinate Judge held that

''on a true construction of the security bond, Uttam Chand had undertaken personal liability, and that it is not possible at that stage to re-open the execution proceedings by holding that no such liability could be enforced."

The latter ground appears to be based on the reasoning stated at the close of the immediately preceding paragraph of the judgment that

"the executing Court acted on the assumption that Uttam Chand bad undertaken a personal liability and this assumption does not appear to have been challenged at any stage of the proceedings,"

but it must be noticed that the sons and grandson of Uttam Chand have a valid right of challenging that assumption by instituting a suit if they can make out a proper case. In the view which the learned Judges took, which they thought was "sufficient to conclude the case", the question of pious obligation did not seem to them to arise for decision; however, they did not consider it, but nothing turns upon that now. Before passing, it may be mentioned that the learned Judges were not prepared to accept the view of the trial Court that the executing Court would in any case have been entitled to act as it did by virtue of the provisions of S. 68, T. P. Act.

Mr. Subba Rao, the learned counsel for the appellants, contended before the board that Uttam Chand was not personally liable under the terms of the security bond, and that in reality there was no debt due by him outstanding in consequence of which family property, either secured or unsecured, could be sold. The main question for their Lordships to consider is whether the security bond imposes any personal liability on Uttam Chand, for unless this is established first, properties other than those covered by the security bond can in no event be validly sold. It was argued by Sir Thomas Strangman that the expression "I stand surety for Hans Raj and others" appearing at the commencement of the operative portion of the deed to which their Lordships have already called attention, means I promise to pay, and imports personal liability. The argument is not without some force, but their Lordships have, after careful consideration, come to the conclusion that the statement which immediately follows the expression referred to, namely, "and agree that . . . my moveable and immovable properties detailed hereunder shall be liable" qualifies it and limits the scope of the liability to proceedings against the properties specified only, thus creating a charge on them excluding all personal liability. That this is the proper construction that should be put upon the document appears to be clear from the order passed by Coldstream J. when he stayed the execution of the decree. That order states clearly that the property should not be sold if the petitioners can furnish surety "in the form of a charge upon immovable property" and it was complied with by Uttam Chand by executing the bond in question. Their Lordships pointed out in ('32) 19 AIR 1932 PC 131 : 186 IC 629 (PC), Raja Raghunandan Prasad Sing v. Raja Kirtyanand Singh where the construction of a security bond executed in pursuance of an order passed by the Court arose for decision that it "must be considered in the light of the order directing security to be given." Read in the light of Coldstream J.'s order, there can be no doubt that the obligation undertaken by Uttam Chand was merely confined to the extent of the properties charged by him for the satisfaction of the amount. Another argument urged by the learned counsel in support of his contention, viz., that the appropriate form of the bond in a case of this kind, as may be seen from App. G, Civil PC, would clearly provide for a personal liability, and that the order for furnishing security must therefore be construed as having been made with reference to such a form, overlooks the fact that the order of the Court is perfectly clear, and what their Lordships are called upon to do is to construe a specific document with reference to its specific terms, and if need be in the light of the Court's order which, as they have already stated, is not open to any doubt, The next argument, that the inclusion of the moveable properties in the deed would suggest that Uttam Chand had thereby undertaken personal liability, cannot be accepted as the terms of the document do not impose any such liability and nothing is known as to why those items were included in the deed. The last argument advanced in this connexion, that even if there is no personal liability originally incurred by Uttam Chand under the stipulations of the security bond, he became personally liable as he had transferred a major portion of the property included by him in the security bond, should also be disallowed as it was not made clear to their Lordships how in the present case the privilege conferred by S. 58, TP Act, on a mortgagee to sue for money can be availed of by a charge bolder, in proceedings in execution of a decree, without resorting to a suit, assuming that the security has been impaired by the conduct of Uttam Chand which itself is open to some doubt. For these reasons, their Lordships hold that as it is not shown that Uttam Chand has made himself personally liable for the amount that remained due to the decree-holder there was no debt due from him, and it follows therefore that the unsecured property in question cannot be validly sold in enforcement of the security bond. The same is the position with regard to the secured property also. To make the ancestral property liable, there must in reality be a debt due by the father. In the present case, the security bond was executed not for the payment of any debt due by Uttam Chand, but for payment of a debt which was due from third parties. Unless there was a debt due by the father for which the security bond was executed, the doctrine of pious obligation of the sons to pay their father's debt cannot make the transaction binding on the ancestral property.

For the foregoing reasons their Lordships are of opinion that this appeal should be allowed and that the decrees of the Courts in India should be set aside and that it should be declared that the security bond dated 31st July 1928 executed by Uttam Chand in Nand Lal v. Hans Raj and others is not binding on the appellants or on the properties comprised therein; that the sale proceedings in execution of the decree of defendant 9 in Nand Lal v. Hans Raj and others relating to the joint family properties of the appellants and defendant 1 (described in para. 4 and list A of the plaint) are null and void and (a) the purchasers at the auction sales, namely, Nand Lal and Gehla Ram defendant 3 and (b) the alienees of Nand Lal, namely, defendants 4 to 9 acquired no title to the said properties; that each of defendants 2 to 9 do put the appellants and defendant 1 in possession of such of the properties described in para. 4 and list A of the plaint as he may be possessed of; so far as defendant 2 is concerned on being paid Rs. 646.5-0; and that defendants 2 to 9 should pay the appellants the costs of this appeal and their costs incurred in the High Court and the Court of the Subordinate Judge, First Class, Montgomery. It is said that defendants 2 to 9 have been in possession of the properties and have deprived the appellants' family of possession and enjoyment of the same and that it is just and right that they should account for the profits received or which might have .been received by them. Their Lordships think that whatever rights the appellants may have in this respect should be claimed by them in a separate suit which will not be barred by these proceedings. Their Lordships will humbly advise His Majesty accordingly.

Appeal allowed.