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Nripendra Chandra Saha Choudhury v. Md. Abbas Ali
Factual and Procedural Background
This is an appeal arising from a suit to enforce a mortgage dated 3 March 1917. The suit was instituted on 23 December 1929 for Rs. 11,197 (principal as stated in the mortgage bond plus interest to the date of institution at the contractual rate). A preliminary decree was passed on 9 July 1930 and a final decree on 8 November 1930 for Rs. 12,815-4 (including Rs. 1,124-6 costs). Several attempts at execution were infructuous. The last application for execution was made on 27 January 1937; it was temporarily stayed by the Debt Settlement Board, but the stay lapsed when the debtors' application under sec. 8 of the Bengal Agricultural Debtors Act was dismissed.
While that application for execution was pending, the Bengal Money-Lenders Act, X of 1940 (the Act) came into force. The mortgagors then applied for relief under section 36 of the Act. The learned Subordinate Judge allowed relief, re-opened the preliminary and final decrees of 1930, and passed a new preliminary decree dated 22 February 1941 for Rs. 6,961 (principal and interest calculated to that date), awarding about Rs. 698 as costs. The total (Rs. 7,659-12-4) was made payable in five equal yearly instalments, with default recoverable under section 34(1)(b) of the Act. In fixing the principal of the “original loan” for the re-opened decree, the Subordinate Judge took Rs. 3,781 as the principal (being Rs. 3,593 recited advances plus Rs. 188 cash advanced at date of mortgage) and allowed interest accordingly. Both mortgagees and mortgagors appealed against the Subordinate Judge's decree.
The mortgage instrument executed on 3 March 1917 recited a number of prior simple money bonds with itemised amounts summing to Rs. 3,593 and then recorded an adjustment showing Rs. 4,484 due on those simple bonds plus Rs. 188 advanced in cash at the date of the mortgage, fixing Rs. 4,672 as the principal on which interest at 12% per annum was payable. The borrowers admitted entitlement to relief; the central controversy became what amount is to be treated as the "principal of the original loan" for purposes of section 36 relief: Rs. 4,672 (the amount agreed in the mortgage), Rs. 3,781 (sum of the recited advances plus the cash advance), or some lesser sum.
Legal Issues Presented
- Whether, for the purpose of re-opening the decree under section 36 of the Bengal Money-Lenders Act, the "principal of the original loan" must be taken to be the amount actually advanced to the borrower (as defined in section 2(16)) or the amount agreed and recorded as principal in the mortgage instrument (Rs. 4,672).
- Whether the first proviso to section 36(1) (the twelve-year bar) prevents re-opening the mortgage adjustment recorded in the mortgage instrument, and whether that proviso, as interpreted in Jogobandhu De v. Akhoy Kumar Sil, applies to the execution application in this case.
- Whether the Subordinate Judge erred in the exercise of discretion in awarding costs for the re-opened decree (quantum of costs) and whether the decree as framed (including the provision for recovery on default and the instalment schedule) is in accordance with law.
- Whether the number and scheduling of instalments for payment of the re-opened decree are appropriate (the defendants requested ten yearly instalments; the Subordinate Judge had given five).
Arguments of the Parties
Mortgagors' (Borrowers') Arguments
- The mortgagors contended that the recited Rs. 3,593 in the mortgage instrument did not represent amounts actually advanced in full — specifically, that the first item (a Rs. 3,000 simple money bond) was a renewed bond and therefore the actual advances were less than Rs. 3,593. They led evidence to show a lesser actual advance.
- They proceeded on the footing that the re-opened decree should reflect the "amount actually advanced" as the principal of the original loan.
Mortgagees' Arguments
- The mortgagees argued that the mortgage transaction and the adjustment recorded in it could not be re-opened because of the first proviso to section 36(1) of the Act (the twelve-year rule), and therefore the principal must be taken to be what the parties agreed in the mortgage instrument — Rs. 4,672.
- They maintained that the court should give effect to the parties' agreement embodied in the mortgage instrument and not permit evidence to go behind that adjustment.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Jogobandhu De v. Akhoy Kumar Sil | Interpretation that the first proviso to section 36(1) prevents re-opening of a mortgage adjustment where the relevant period (twelve years) has elapsed; applied to an execution application beyond twelve years. | The court proceeded on the footing that the interpretation in that case is correct — i.e., that the proviso could prevent re-opening — and treated the mortgage adjustment as not susceptible to re-opening for the purposes of defining the "original loan" where the proviso applies. |
Court's Reasoning and Analysis
The court analyzed the matter in light of the Act's definitions and the statutory scheme for relief under section 36. Section 2(16) of the Act defines "principal" (subject to contextual repugnancy) as the amount actually advanced to the borrower. Section 30(1) limits interest recoverable after re-opening: no interest exceeding the principal of the "original loan" or exceeding the principal then outstanding can be passed.
Step-by-step analysis undertaken by the court:
- The court accepted the Subordinate Judge's view (and the parties' common footing) that the first proviso to section 36(1) can prevent re-opening of a mortgage adjustment when the "suit" referred to in the proviso includes the application for execution — a construction in line with the Division Bench decision in Jogobandhu De v. Akhoy Kumar Sil. The point was not fully argued before the court, so the court proceeded on that established interpretation without expressing an independent opinion.
- The court recognized the ordinary meaning of "principal" in section 2(16) as the amount actually advanced. Ordinarily, therefore, the principal of the original loan should be the actual advance, not the amount treated as principal on renewals.
- However, the court held that where a mortgage instrument embodies an adjustment which purports to close prior transactions and creates a new obligation — and where the first proviso to section 36(1) prevents re-opening of that adjustment — the parties' agreement in the instrument about what shall be treated as the principal must be given effect. Consequently, the statutory definition in section 2(16) must yield where it is repugnant to the subject or context (i.e., where the agreement recorded in the mortgage cannot be re-opened).
- Applying that reasoning to the present mortgage, the instrument recorded an agreed principal of Rs. 4,672 (Rs. 4,484 recited due on prior bonds plus Rs. 188 cash advanced at the date of the mortgage). Since the adjustment in the mortgage instrument could not be re-opened under the proviso, the court concluded that Rs. 4,672 must be taken as the "principal of the original loan" for the purposes of the re-opened decree.
- On costs, the court relied on sub-section (2) of section 36, which confers a discretion to award costs in respect of re-opened decrees. The court observed that plaintiffs had been entitled to the original decree in 1930 and had properly paid court-fees on the plaint; the court-fees alone exceeded the Rs. 398 awarded by the Subordinate Judge. The defendants had, by questionable tactics, prolonged execution proceedings beyond 1 January 1939. For these reasons the court increased the costs to Rs. 1,124-6 to be awarded in respect of the re-opened decree.
- Because the appellate court was increasing the amount decreed, it adjusted the instalment schedule upward from that made by the Subordinate Judge: the court found no justification for ten yearly instalments and instead granted seven annual instalments, fixing the first instalment at Rs. 2,000 payable within Bysack 1350 B.S and the balance payable in six equal annual instalments within Bysack of each year.
- The court corrected the recovery-on-default provision for a mortgage suit: in the event of default on any instalment, the plaintiffs would have the right to apply for a final decree in accordance with section 34(1)(a), sub-clause (ii) of the Bengal Money-Lenders Act (rather than the clause relied on by the Subordinate Judge).
Holding and Implications
Both appeals are allowed.
Holding (core rulings and monetary consequences):
- The court held that the "principal of the original loan" for the purpose of the re-opened decree is the amount agreed and recorded in the mortgage instrument: Rs. 4,672. The court found that the statutory definition in section 2(16) (amount actually advanced) gives way where that definition would be repugnant to the subject or context because the mortgage adjustment cannot be re-opened under the first proviso to section 36(1).
- On that basis the mortgagees are entitled to Rs. 4,672 (principal) and interest computed as (Rs. 4,672 − Rs. 600) = Rs. 4,072, so that principal and interest together amounted to Rs. 8,744 on account of principal and interest as assessed in the opinion.
- The court further awarded increased costs in respect of the re-opened decree — Rs. 1,124-6 — and stated that the preliminary decree would be for Rs. 9,868-6 plus the balance of appellate costs due to the plaintiffs (the court explained that court-fees and paper-book costs are to be recovered and set off as directed).
- The court adjusted the payment schedule to seven yearly instalments: the first instalment fixed at Rs. 2,000 payable within Bysack 1350 B.S, with the remaining balance payable in six equal annual instalments within Bysack of each succeeding year.
- In the event of default of any instalment, the plaintiffs (mortgagees) would have the right to apply for a final decree in accordance with section 34(1)(a), sub-clause (ii) of the Bengal Money-Lenders Act (the appropriate provision for a mortgage suit).
- Procedural/other implications: both appeals are allowed; the Appellants in each appeal recover court-fees and paper-book costs from their opponents with costs set off against each other; no hearing-fee was awarded to either party.
No new broader precedent was announced beyond applying the established interpretation of the first proviso to section 36(1) (as reflected in Jogobandhu De v. Akhoy Kumar Sil) and applying the Act's statutory scheme to the facts of this mortgage re-opening.
Note: The judgment records the concurrence of Akram, J. ("I agree."). The Chief Counsel initials "C.C" appear at the end of the text.
Mitter, J.:— These two appeals, the first by the mortgagees and the second by the mortgagors, arise in a suit to enforce a mortgage dated the 3rd March, 1917. The suit was instituted on the 23rd December, 1929, for the sum of Rs. 11,197-0-0, which represented the principal, as stated in the mortgage bond, and interest calculated up to the date of the institution of the suit at the rate provided for in the mortgage bond. The preliminary decree was passed on the 9th July, 1930, and the final decree on the 8th November, 1930, for a sum of Rs. 12,815-4, which included Rs. 1,124-6 awarded as costs. There were some infructuous applications for execution. The last application for execution, in the course of which the questions involved in these appeals arose, was made on the 27th January, 1937. This application was stayed for a time by the Debt Settlement Board, but ultimately the stay lapsed, as the debtors' application to the Board made under sec. 8 of the Bengal Agricultural Debtors Act was dismissed. This application for execution was pending when the Bengal Money-Lenders Act, X of 1940, came into force. The mortgagors thereafter applied for relief under sec. 36 of the last-mentioned Act, which will hereafter be referred to as the Act. The learned Subordinate Judge has allowed the application. He has re-opened the preliminary and the final decree passed on the 9th July and 8th November, 1930, respectively, and has passed a new preliminary decree for Rs. 6,961, for the principal and interest calculated up to the 22nd February, 1941, the date of the new preliminary decree. He has awarded Rs. 698 odd as costs. The total amount, namely Rs. 7,659-12-4, has been made payable in five equal yearly instalments, the first of such instalments being made payable in Chaitra, 1347 B.S The decree has further provided that in default of payment of any instalment, the instalment unpaid will be recoverable in terms of sec. 34, sub-sec. (1), cl. (b) of the Act. In making the new decree the learned Subordinate Judge has taken Rs. 3,781 to be the principal of the “original loan.” He accordingly held that Rs. 3,781 only was recoverable as interest and as Rs. 600 had been paid by the borrowers towards interest, the decree was made for Rs. 6,961. Both parties have preferred appeals against his decree.
2. The material facts are as follows:—
Defendant No. 1 Abbas Ali and Dulal Bepary, the predecessor of the other Defendants, had borrowed from time to time sums of money on simple bonds from the Plaintiffs' predecessors, Hriday Chandra Saha Chowdhury and Bepin Chandra Saha Chowdhury. For securing the monies due on account of the principal and arrears of interest due on those simple money bonds the mortgage in suit (Exhibit 1) was executed on the 3rd March, 1917, by Abbas Ali and Dulal Bepary in favour of Hriday Chandra Saha Chowdhury and Bepin Chandra Saha Chowdhury. The mortgage bond recited that the mortgagors had in the past taken the following sums of money on executing simple money bonds:
(1) Rs. 3,000 on the 10th Kartick 1320 B.S (2) Rs. 200 on the 21st Kartick 1320 B.S (3) 100 on the 22nd Karticik 1320 B.S (4) Rs. 100 on the 29th Magh 1321 B.S (5) Rs. 50 on the 5th Magh 1322 B.S and (6) Rs. 143 on the 11th Jaista 1322 B.S Total Rs. 3,593
3. The mortgage bond further recited that after crediting payments made towards principal and interest and after remissions the sum of Rs. 4,484 was then due on the simple money bonds. A sum of Rs. 188 was advanced in cash at the date of the mortgage bond. The sum total of Rs. 4,484 and Rs. 188, namely, Rs. 4,672 was agreed upon as the principal on which simple interest at the rate of 12 per cent, per annum was made payable. The mortgagees admitted before the learned Subordinate Judge that the borrowers were entitled to relief. The learned Subordinate Judge has also held that they are entitled to relief. The principal controversy before him, and before us, is, what must be taken to be the “principal of the original loan” for the purpose of passing the new preliminary decree: whether (1) the sum of Rs. 4,672 which was treated as principal in the mortgage bond or (2) Rs. 3,593 + Rs. 188 = Rs. 3,781 or (3) a sum less than Rs. 3,781.
4. Before the learned Subordinate Judge the borrowers contended that Rs. 3,593 had not been actually advanced by the lenders on the simple money bonds but a lesser sum, inasmuch as the simple money bond for Rs. 3,000, the first item recited in the mortgage instrument, was a renewed bond. They led evidence in support of their contention on the point. The mortgagees on the other hand said that as the mortgage transaction cannot be re-opened in view of the first proviso to sec. 36, sub-sec. (1) of the Act, it being beyond twelve years “of the suit,” the principal must be taken to be what has been agreed upon by the parties in the mortgage instrument, namely Rs. 4,672. The learned Sub-ordinate Judge has overruled both these contentions. He has taken, as I have already stated, the sum of Rs. 3,781 to be the principal of the original loan. For overruling the contention of the borrowers he held that as the adjustment recorded in mortgage instrument cannot be re-opened in the view of that proviso, the borrowers cannot say that Rs. 3,000 was not the actual advance on the questioned simple money bond. He accordingly proceeded upon the recital of the mortgage instrument in fixing Rs. 3,781 as the principal of the loan. In his judgment, however, he gave no reasons for repelling the contention of the mortgagees.
5. The mortgagors do not challenge before us the finding of the learned Subordinate Judge, but the mortgagees do. They urge that Rs. 4,672 has to be taken as the principal of the original loan.
6. The parties have proceeded before us on the footing that the first proviso to sec. 36, sub-sec. (1) of the Act prevents the re-opening of the mortgage. That is the conclusion of the learned Subordinate Judge and that conclusion would be right if the “suit” mentioned in that proviso would include the application for execution, which in this case, was made in 1937, that is, beyond twelve years of the mortgage. That view is in accord with what has been said by a Division Bench in Jogobandhu De v. Akhoy Kumar Sil(1) to which my learned brother Akram, J., was a party. As the point has not been argued before us I do not express any opinion but proceed upon the finding that the interpretation put upon the proviso in that case is correct.
7. The word “principal” has been defined in sec. 2(16) of the Act. Unless there is anything repugnant in the subject or context it means the amount actually advanced to the borrower. When for the purpose of granting relief to the borrower a decree is re-opened, a new decree must be passed and that decree must be passed in conformity with the provisions of the Act. No interest exceeding the principal of the “original loan” or exceeding the principal then outstanding can be passed. [Sec. 30, sub-sec.(1), cls. (a) and (b)]. Ordinarily the principal of the original loan must be taken to be what had been actually advanced at the time of the first loan, not what has been regarded or treated by the parties as principal at the time of renewals. But that meaning must give way if it conflicts with the first proviso to sec. 36, sub-sec. (1). The mortgage which we have before us proceeds upon an adjustment then made. It has purported to close previous transactions and has created a new obligation. The adjustment cannot accordingly be re-opened. In it an agreement is also embodied by which the parties agree to treat Rs. 4,484 plus Rs. 188, i.e, Rs. 4,672 to be the principal. That agreement cannot also be re-opened by the Court. If there had been no recital in the mortgage instruments that Rs. 3,593 was the amount advanced on the simple money bonds the borrowers would not have been able to go behind the statement as regards principal as contained in the mortgage instrument. In my judgment, the fact that the original advance has been stated therein by way of recital would not make any difference, for if the recital be given effect to for the purpose of ascertaining the principal on the footing of actual advance, the agreement as contained in the mortgage instrument would be nullified. As that agreement cannot be touched, the “original loan” must be taken to be what is secured by the mortgage instrument. The definition as given in sec. 2(16) must therefore give way as being repugnant to the subject. Though no reason have been given on this point in Jogobandhu De's case this was what was done in that case. The decree of the learned Subordinate Judge is accordingly modified. The mortgagees would be entitled to Rs. 4,672 by way of principal and (Rs. 4,672— Rs. 600) by way of interest that is Rs. 8,744 on account of principal and interest.
8. The mortgagees have raised two other points, namely: (i) that the lower Court in the exercise of its discretion ought to have awarded as costs the same amount which had been awarded in the original decree; and (ii) that the decree as passed is not in accordance with law.
9. In my Judgment both these points ought to succeed.
10. Sub-sec.(2) of sec. 36 of the Act gives power and a discretion to the Court to give costs in respect of the re-opened decree. In this case the re-opened decree was passed as far back as 1930. At the time of the institution of their suit the Plaintiffs were entitled to get a decree for the sum claimed in the suit. They were justified accordingly in paying the amount of court-fees which they paid on their plaint. That sum alone exceeds the sum of Rs. 398 which the learned Subordinate Judge has given as costs in respect of the re-opened decree, and accounts for more than three-fourths of the amount of costs originally decreed. The Defendants by recourse to questionable tactics have prolonged the execution proceedings beyond 1st January, 1939. In these circumstances, I think the sum of Rs. 1,124-6 ought to be awarded as costs in respect of the re-opened decree. The preliminary decree accordingly would be for the sum of Rs. 9,868-6 plus the balance of the costs of these appeals which would be due to the Plaintiffs.
11. In their appeal the Defendants contend that at least ten yearly instalments ought to have been given. There is no justification for their prayer. The substantial part had been borrowed before 1917. The mortgage was executed in 1917 and only Rs. 600 had been paid up to now. They have substantial income from land and business. But as I am increasing the amount decreed by the learned Judge, I am prepared to give them seven yearly instalments. The first instalment awarded by the learned Subordinate Judge was due in Chaitra, 1347 B.S and the second is about to become due. In these circumstances, I direct the first instalment to be Rs. 2,000 to be paid within Bysack 1350 B.S and the balance to be paid in six equal annual instalments payable within Bysack of each year.
12. The decree made by the learned Sub-ordinate Judge is not in accordance with law.
13. As the suit is on a mortgage the decree would be that in default of payment of any instalment the Plaintiffs would have the right to apply for final decree in accordance With the provisions of sec. 34, sub-sec. (1), cl. (a), sub-cl. (ii) of the Bengal Money-Lenders Act.
14. The result is that both the appeals are allowed. The Appellants in each of the appeals would get from their opponents the costs of the court-fees and the paper-book costs. The costs are to be set off against each other. The balance that may be found due to the Plaintiffs Appellants would be added to the preliminary decree on the mortgage. No hearing-fee is awarded to any of the parties.
Akram, J.:— I agree.
C.C
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