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Girdhari Lal v. Gobind Ram

Allahabad High Court

Mar 3, 1921

Judgment

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Factual and Procedural Background

This is a first appeal from a decree of the learned Subordinate Judge of Muttra concerning a mortgage transaction and a subsequent suit. The sequence, as presented in the opinion, is:

Girdhari Lal (defendant No. 1) had dealt with the plaintiff's firm since the early 1880s.
Accounts were cast in June 1891, and a mortgage-deed dated 13 June 1891 was given for Rs. 2,500.
A suit was instituted in 1906 on the bond of 13 June 1891 to recover the money due. At that time one son, Manohar Lal, was alive.
On 7 November 1906 the parties compromised; a fresh bond (mortgage-deed) dated 5 November 1906 was given to the plaintiff and the earlier suit was withdrawn.
Subsequently two more sons (Dwarka Prasad and Ram Das) were born to Girdhari Lal. Another son, Madhusudan, had been born on 13 January 1887 and died in 1895.
On 22 January 1917 the plaintiff filed the suit underlying this appeal seeking recovery of Rs. 17,920-11-3 due on the mortgage-deed of 5 November 1906, against Girdhari Lal and his three sons. All defendants resisted and raised various pleas.
The Subordinate Judge held that the deed of 5 November 1906 was given for legal necessity and decreed the claim; the defendants appealed.

Legal Issues Presented

Whether the debt secured by the 13 June 1891 deed had become time-barred by limitation (such that a subsequent deed of 5 November 1906 could not bind the sons or ancestral property).
Whether the loan secured by the deed of 5 November 1906 was taken for the benefit of the family or otherwise constituted a legal necessity (which would affect the sons' liability).

Arguments of the Parties

Defendants-Appellants' Arguments

The loan secured by the 5 November 1906 deed was not for the benefit of the family and there was no legal necessity.
The 1906 deed was given in lieu of the 13 June 1891 deed, and the debt under the 1891 deed had become time-barred by 1906. They relied on the principle that in a simple mortgage the limitation period for suing is 12 years.
Because Madhusudan (a son) was alive when the 1891 deed was executed (born 13 January 1887, died 1895) and another son (Manohar Lal) was also alive before Madhusudan's death, it was incumbent on the plaintiff to satisfy itself that the advance was for legal necessity; the subsequent death of Madhusudan did not cure that defect.
Counsel for appellants relied on the decision in Gayadin v. Jhumman Lal (Full Bench) to argue that where a creditor has an option to sue for the whole amount on the happening of a certain event and omits to exercise that option, limitation will begin to run from the date of omission.

Plaintiff's / Respondent's Position (as reflected in the opinion)

The plaintiff had exercised an option contained in the 1891 deed to allow interest to compound (i.e., to let the interest "mount up"), thereby increasing the debt from Rs. 2,500 to more than Rs. 10,000 by the time the 1906 deed was executed.
The terms of the 1891 deed (a covenant giving the creditor three alternative courses on default) meant that limitation did not begin to run merely because the creditor did not immediately sue for the whole amount.
The plaintiff proceeded by suit and compromise in 1906 and obtained the fresh deed of 5 November 1906; on the basis of the wording of the 1891 deed and the plaintiff's conduct, the debt was not time-barred.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Shamu Patter v. Abdul Kadir	The rule that in the case of a simple mortgage the time within which a mortgagee can sue for recovery of money is 12 years.	The appellants invoked this principle to contend that the 1891 bond was barred in 1903 (12 years after 1891). The court considered this limitation point but examined the specific covenant in the 1891 deed and concluded that limitation had not actually run because of the creditor's option and conduct.
Gayadin v. Jhumman Lal (Full Bench)	Authority for the proposition that where a creditor is entitled, on the happening of an event, to either sue for the whole or for interest only, and the creditor omits to sue for the whole, time may begin to run from the date of that omission.	The court considered Gayadin but distinguished it: the facts and the covenant in Gayadin differed materially from the present deed. The court held that in the present deed the creditor was given three distinct options, and the Full Bench decision in Gayadin was not applicable to produce the same limitation consequence here.

Court's Reasoning and Analysis

The court's analysis proceeded by close textual examination of the covenant contained in the 13 June 1891 deed and by distinguishing prior authorities relied on by the appellants. The steps in the court's reasoning, as set out in the opinion, are:

Identification of the relevant legal question: whether the debt under the 1891 bond had become barred by limitation so that the 1906 deed could be treated as given in lieu of a time-barred debt, and whether the 1906 deed was a transaction made for legal necessity.
Reference to authority on limitation: the court acknowledged the Privy Council's ruling in Shamu Patter v. Abdul Kadir that a mortgagee has 12 years within which to sue in a simple mortgage; on that basis appellants argued the 1891 bond became time-barred in 1903.
Close reading of the covenant in the 1891 deed: the court quoted the relevant clause showing that on default in payment of two consecutive semi-annual interest instalments (i.e., one year), the creditor was given three options — (a) to sue for the whole (principal and accrued interest), (b) to allow the interest to be compounded (treating unpaid interest as principal and charging interest thereon), or (c) to sue for interest alone.
Legal consequence drawn from the covenant: the court held that where a creditor has such an explicit option, the mere abstention from suing for the whole amount does not, of itself, start the running of limitation against him. In other words, limitation does not begin merely because the creditor chose another of the contractually permitted alternatives.
Distinguishing Gayadin v. Jhumman Lal: the court examined Gayadin (relied on by appellants) and found its facts materially different. In Gayadin, the creditor had a different contractual position (no such three-way option as in the present deed) and the Full Bench's conclusion about the commencement of limitation therefore did not apply here.
Application to the present facts: the court observed that the plaintiff had in effect exercised the option to allow interest to compound, which caused the original Rs. 2,500 to increase substantially by the time of the 1906 transaction. Consequently, when the plaintiff sued in 1906 (or when the compromise and the deed of 5 November 1906 were made), the debt under the 1891 deed had not become barred by limitation.
Conclusion from the above: the defendants' contention that the 1906 mortgage-deed was given in lieu of a time-barred debt failed. The court then disposed of other contentions on the evidence (the opinion states this disposition but does not elaborate those factual findings in detail) and dismissed the appeal with costs.

Holding and Implications

Appeal dismissed.

Direct consequences for the parties:

The decree of the Subordinate Judge of Muttra, which had held that the deed of 5 November 1906 was given for legal necessity and decreed the plaintiff's claim, was sustained; the defendants' appeal was dismissed with costs.
The contention that the 1906 deed was given in lieu of a time-barred debt was rejected because, on the court's reading of the 1891 deed, the creditor had exercised an option to compound interest and the debt had not become barred when the 1906 deed was obtained.

The opinion does not discuss broader doctrinal implications or purport to lay down a new rule of law beyond its application to the contractual terms of the 1891 deed; it resolves the appeal on the deed's wording and the parties' conduct.

Show all summary ...

Rafique, J.:— This is a first appeal from a decree of the learned Subordinate Judge of Muttra on the basis of a mortgage-deed, dated the 5th of November, 1906. It appears that the defendant No. 1 Girdhari Lal had been dealing with the plaintiff's firm ever since the early eighties. The accounts between the plaintiff's firm and Girdhari Lal were cast up in June 1891, when a mortgage-deed was given to the plaintiff's firm by Girdhari Lal for Rs. 2,500. In 1906 a suit was brought on foot of the bond of the 13th June, 1891, for recovery of the money due upon it. At the time of the institution of the suit one of the sons of the defendant, namely, Manohar Lal, had been born and was alive. There was a compromise between the parties on the 7th of November, 1906, under which a fresh bond was given to the plaintiff on the 5th of November, 1906. After the completion of the compromise the suit was withdrawn by the plaintiff. Subsequently two more sons were born to Girdhari Lal, namely, Dwarka Prasad and Ram Das. On the 22nd of January, 1917 the suit out of which this appeal has arisen was filed by the plaintiff for the recovery of Rs. 17,920-11-3 due upon the mortgage-deed of the 5th of November, 1906. The claim was brought against Girdhari Lal and his three sons. All the defendants resisted the suit and urged various pleas.

2. The defence with which we are concerned in this appeal was advanced on behalf of the sons to the effect that the loan secured by the deed of the 5th of November, 1906, was not taken by Girdhari Lal for the benefit of the family nor was there any legal necessity for the loan. The question of legal necessity was raised by the defence in two ways. First, it was urged that the deed of the 5th of November, 1906, was given in lieu of the deed of the 13th of June, 1891, and that the debt due upon the dead of 1891 had already become barred in 1906. A father hypothecating joint family property in lieu of a time-barred debt cannot be said to have hypothecated the property for legal necessity. Secondly, it was urged that the debt secured by the deed of 1891 was contracted at a time when Girdhari Lal has a son already alive. The name of that son was Madhusudan who was born on the 13th of January, 1887 and who died in 1895. As Madhusudan was alive at the time the deed of 1891 was given it was for the plaintiff to see that the money advanced by him was advanced for legal necessity. The death of Madhusudan in 1895 would not in any way affect the question of legal necessity, for prior to his death Manohar Lal had already been born. IC the prior debt of 1891 is to be considered as not warranted by legal necessity the death of Madhusudan would not affect the question at all. The learned Subordinate Judge after considering the evidence in the case was of opinion that the deed of the 5th of November, 1906, was given for legal necessity; the claim was accordingly decreed.

3. In appeal before us the same two points are urged by the learned Counsel for the defendants-appellants. It is argued by him that the mortgage of 1891 was already barred at the time that the deed now in suit was given by Girdhari Lal, Their Lordships of the Privy Council have held in the case of Shamu Patter v. Abdul Kadir (1), that in the case of a simple mortgage, the time within which a mortgagee can sue for the recovery of money is 12 years. The period of limitation therefore expired in respect of the bond of 1891 in 1903. The grant by Girdhari Lal of a fresh deed to the plaintiff in respect of a time-barred debt would not under the Hindu Law bind his sons or the ancestral property. In order to appreciate and determine the question raised by the learned Counsel for the defendants-appellants we have to refer to the terms of the deed of the 13th of June, 1891. We find the following covenant in the said deed:—

“It I tail to pay the whole or part of interest on the aforesaid amount every six months then at the close of a year the said interest shall be treated as principal and I shall pay interest at the rata fixed above on that amount also. Till payment in full of the debt due under this bond this mode of paying interest shall remain in force. In the event of nonpayment of interest for two consecutive periods of six months, that is, for the entire year the said creditore have power either to benefit themselves by the condition regarding the compound interest as herein mentioned or to realise in any way they like without waiting for expiry of the stipulated period fired for payment of the principal, the whole of the principal and interest in a lump sum or only the interest which under the teems of this bond might be due to them by that time, from ma as well as by the sale of the hypothecated property mentioned below and also from other moveable and immoveable property of mine and I shall have no objection whatever”.

4. Now it is quite apparent from the terms of this covenant that the creditor was given three options in case of default in the payment of two consecutive instalments of interest, namely, eitherto sue for the whole, that is, the principal and interest, or to let the interest mount up or to sue for interest only. If the creditor did not choose to exercise his option of suing for the whole amount due on default of the payment of two consecutive instalments of interest by the debtor it cannot be said that the time began to run from such abstention.

5. However the learned Counsel for the appellants contends to the contrary. He has referred us to the case of Gayadin v. Jhumman Lal (2). He argues that the case of Gayadin is on all fours with the present case and that in the case of Gayadin it was decided by a Full Bench of this Court that where an option is given to a creditor, that is, on the happening of a certain event, to either sue for the whole amount, principal and interest included, or for interest only, and the creditor omits to exercise his option and sue for the whole amount due, time will begin to run from the date of the omission to sue for the whole amount. We have carefully considered the case of Gayadin and in our opinion the facts of that case are quite dissimilar to the facts of the present case. In that case no option, as far as we can see from the recital of the terms of the bond given therein, was given to the creditor. The latter had to sue on the happening of a certain event. He failed to do so and the Full Bench of this Court held that time began to run against him from the date of his omission to sue. It is true that in that case at the end of the bond it was recited that in case the creditor did not sue as he was entitled to, on default in the payment of interest, the interest will go on running and mounting up in favour of the creditor up to the date of payment. That is quite a different covenant to that given in the deed before us. In the deed of 1891 it is clearly stated that the creditor has three options which we have already mentioned above. The plaintiff seems to have exercised one of the options, namely to let the interest mount up at compound rate and it was due to that fact that Rs. 2,500 mounted up to more than Rs. 10,000 at the time the dead in suit was given. We therefore hold that when the suit was brought by the plaintiff in 1906 in the month of August or when the compromise was entered into and the deed of the 5th of November, 1906, was obtained from the defendant No. 1, the debt due on the deed of 1891 had not become barred by time. The argument for the defendants-appellants that the mortgage-deed of 1906 was given in lieu of a time-barred debt therefore falls to the ground.

6. [The judgment then disposed of the contention for the defendants-appellants on the evidence in the case and dismissed the appeal with costs.]

7. Appeal dismissed.