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  • Fazl Ali
  • Chatterji, JJ.
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  • Fazl Ali
  • Chatterji, JJ.
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Smart Summary

Structured Summary of the Opinion (Chatterji, J.)

Factual and Procedural Background

This is an appeal by defendant 1 from the decision of the Subordinate Judge of Muzaffarpur which had reversed the decree of the Munsif and decreed the plaintiff's suit for recovery of manhunda rent for the years 1331–1334. The suit concerned 4 bighas 19 cottas 1 dhur of land and was based on a registered kabuliyat dated 31 October 1922 executed by Elahi Bux, the predecessor-in-interest of the defendants (his children and nephews).

On the same day (31 October 1922) Elahi Bux granted a zarpeshgi for Rs. 1,500 in favour of the plaintiff. The arrangement was that the plaintiff would be in possession of the lands as rehandar, the lands being hypothecated in simple mortgage as security. Elahi Bux agreed to hold the land on manhunda rent of 75 maunds of paddy each year for 1330–1334.

The appellant (defendant 1) contested the suit on the ground that the zarpeshgi and the kabuliyat were illegal and void, alleging undue influence and pressure; the Munsif accepted that defence and dismissed the suit. On appeal the Subordinate Judge reversed the Munsif, finding that the kabuliyat created a landlord–tenant relationship not vitiated by undue influence and that the zarpeshgi's consideration was valid (whether in cash or by way of commission). Chatterji, J. delivered the present opinion, modifying the decree as to the measure of recovery.

Legal Issues Presented

  1. Whether the kabuliyat and the zarpeshgi constituted a single transaction (part of a mortgage) or whether the kabuliyat created a distinct landlord–tenant relationship such that the plaintiff's suit was maintainable under the Bengal Tenancy Act.
  2. Whether the zarpeshgi (and the consideration for it) was void for undue influence, pressure or as an immoral promise / against public policy (including reliance on Illustration (j) to Section 23 of the Contract Act and authorities cited).
  3. If the plaintiff were entitled to recover in respect of unpaid manhunda rent, what measure of recovery should be applied — the contractual stipulated rupee rate (Rs. 300 per year in lieu of paddy) or the market value of the paddy for the years in suit (and what rate of damages should be applied)?

Arguments of the Parties

Appellant's Arguments

  • The zarpeshgi and the kabuliyat formed part of the same transaction; therefore no landlord–tenant relationship was created and the suit was not maintainable under the Bengal Tenancy Act.
  • The zarpeshgi bond was illegal and void, having been procured by undue influence and pressure; alternatively, the consideration for the zarpeshgi was an immoral or improper commission (relying on Illustration (j) to Section 23 of the Contract Act and authorities such as Harrington v. The Victoria Bathing Dock Company), and thus the heirs could avoid the bond.

Respondent / Plaintiff (as reflected in the opinion)

  • The kabuliyat created a landlord–tenant relationship and was not merely the realization of mortgage interest; the zarpeshgi was supported by valid consideration (either cash or commission for negotiating a loan) and was not vitiated by undue influence.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Chimman Lal v. Bahadur Held that a mortgage and a lease executed simultaneously may be two distinct transactions; the kabuliyat could establish a landlord–tenant relationship such that a suit on the kabuliyat would lie only in a revenue court. Relied upon to reject the appellant's argument that the kabuliyat and zarpeshgi were a single mortgage transaction and to support the view that the kabuliyat established a landlord–tenant relationship.
Uttam Chandra Daw v. Raikrishna Dalal Approved the approach that a kabuliyat (simultaneous lease arrangement) establishes landlord–tenant relations and is not merely the realization of mortgage interest. Referred to with approval as supportive authority for treating the kabuliyat as creating tenancy rather than being subsumed into a mortgage.
Khuda Baksh v. Alimunnissa Similar view taken about the effect of simultaneous mortgage/lease instruments resulting in landlord–tenant relations under a kabuliyat. Used as another supporting precedent consistent with the Calcutta view that the kabuliyat may give rise to tenancy relations.
Tilakdhari Singh v. Chaturgun Bind (A.I.R. 1925 Pat. 118) Held in that case that a zarpeshgi was an instrument of mortgage and not a lease; however, the decision did not dissent from the Calcutta view when the facts supported treating the mortgagor as a raiyat and the mortgagee as claiming rents under the kabuliyat. Distinguished rather than followed; the court noted that even in that decision the claim of the zarpeshgidar for rents stipulated by the kabuliyat had been decreed, so it did not support the appellant's contention here.
Harrington v. The Victoria Bathing Dock Company Cited by the appellant in support of the proposition that certain promises to pay commission might be immoral or opposed to public policy. The court held the appellant's reliance on this authority (and Illustration (j) to Section 23) to be misplaced and inapplicable on the facts; it did not change the finding that there was valid consideration and no moral turpitude.
Janson v. Driefonteir Authority for the proposition that courts should not invent new heads of public policy. Quoted to support the cautionary approach that the courts should not create new public policy doctrines to invalidate the promise to pay commission in the absence of established grounds.
Equitable Life Assurance Co. v. Reed Lord Halsbury's observation that “I deny that any Court can invent a new head of public policy.” Quoted by the court in support of the principle that the doctrine of public policy must be applied cautiously and cannot be freely invented by courts.
Srinivas v. Ramchandra Observed that as public opinion and morality develop, application of public policy doctrine may vary; each case must be decided on its facts. Referred to for the proposition that public policy doctrines evolve and each case requires fact-specific decision; used to justify not extending public policy to invalidate the commission here.
Anon (referred in text) An earlier decision where a mortgage and lease executed simultaneously were treated as distinct, and the lease treated as a lease in substance. Used as an illustrative authority (together with Chimman Lal) demonstrating that simultaneous deeds do not necessarily merge into a single mortgage transaction.

Court's Reasoning and Analysis

The court proceeded through the following principal analytic steps, based on the facts and authorities cited in the record:

  1. On the question whether the kabuliyat and zarpeshgi formed a single mortgage transaction or gave rise to a landlord–tenant relationship, the court accepted the Calcutta line of authority (notably Chimman Lal v. Bahadur and Uttam Chandra Daw v. Raikrishna Dalal) that the two instruments can be distinct and that a kabuliyat may establish a landlord–tenant relation even if the share of crops is appropriated towards mortgage interest. The mere fact that the deeds were executed on the same date does not necessarily make them one transaction.
  2. The court rejected the appellant's contention that the kazi/present case should be treated as part of the mortgage interest realization, holding that the kabuliyat created legal relations of landlord and tenant. The court relied on prior decisions and specific observations (quoted at length) which treat simultaneous leases and mortgages as separable in legal effect.
  3. On the question of undue influence and whether the zarpeshgi was without valid consideration (or was procured by pressure), the court accepted the Subordinate Judge's factual finding that the defendants failed to adduce satisfactory evidence to prove that the zarpeshgi bond lacked consideration or was executed under pressure. The court emphasized that the zarpeshgi deed in favour of the Hardi Babus was dated 26 August 1922 — two months before the zarpeshgi bond in favour of the plaintiff was executed and registered on 31 October 1922 — which undermined the defendants' story that the plaintiff would obstruct the Hardi Babus unless he were given the bond.
  4. The court held that there was no evidence of moral turpitude or of the plaintiff being induced to derelict duties as a servant of the Hardi Babus; therefore Illustration (j) to Section 23 of the Contract Act and the authority cited by the appellant were inapposite. The court reiterated established limits on judicial creation of new public-policy grounds, citing Janson v. Driefonteir and Equitable Life Assurance Co. v. Reed, and noting the need for fact-specific application of public policy (Srinivas v. Ramchandra).
  5. On the measure of recovery, although the kabuliyat stipulated an alternative rupee rate (Rs. 300 per year) in lieu of paddy, the court held that the plaintiff could not recover a higher value than the paddy’s market price during the years in suit. The parties agreed that the average market value of 75 maunds of paddy during the relevant years was Rs. 180 per year. The court also adjusted the rate of damages: a previously allowed 25% was reduced to 12.5% having regard to the facts.
  6. Based on these findings (accepting the Subordinate Judge's factual findings except as to measure of recovery and quantum of damages), the court modified the decree of the Subordinate Judge to reflect the market valuation and reduced damages, and otherwise confirmed that court's decree in favour of the plaintiff.

Holding and Implications

Holding: The decree of the Subordinate Judge is modified as to the measure of recovery (market valuation of the paddy and reduction of damages) and is confirmed in all other respects. The plaintiff's suit is decreed, modifiedly, for recovery of manhunda rent for the years 1331–1334.

Implications and immediate consequences:

  • The court treated the kabuliyat as creating a landlord–tenant relationship and rejected the argument that the instruments were merely parts of a mortgage transaction for purposes of defeating the suit under the Bengal Tenancy Act.
  • The court upheld the Subordinate Judge’s factual finding that there was no undue influence or vitiating pressure in execution of the zarpeshgi in favour of the plaintiff; that finding of fact was treated as binding on this Court.
  • Monetary remedy: although the kabuliyat provided an alternative rupee rate of Rs. 300 per year, the plaintiff may recover only the market value of 75 maunds of paddy for the years in suit, which the parties agreed averaged Rs. 180 per year; the previously allowed 25% damages were reduced to 12.5%.
  • Costs: the plaintiff's suit is decreed with proportionate costs throughout in all the Courts; the appellant is to bear his own costs.
  • On precedent and policy: the court explicitly refrained from creating any new head of public policy to invalidate the commission or zarpeshgi; it applied established authorities and emphasized cautious application of public policy doctrines.
  • Fazl Ali, J. concurred with the conclusions and the proposed order.

Note: This summary is confined strictly to the facts, arguments, authorities and conclusions as set out in the provided opinion. No information beyond the text of the opinion has been added.

Show full summary ...

    Abdul Rahim v. Raghunath Sukul

    Chatterji, J.:— This appeal by defendant 1 arises from a decision of the Subordinate Judge of Muzaffarpur reversing the decree of the Munsif and decreeing the plaintiff's suit for recovery of manhunda rent for the years 1331–1334 relating to 4 bighas 19 cottas 1 dhur of land on the basis of a registered kabuliyat dated 31st October 1922 executed by one Elahi Bux Mian the predecessor-in-interest of the defendants who are his children and nephews. A zarpeshgi for Rs. 1,500 came to be granted by Elahi Bux in favour of the plaintiff on the same day, 31st October 1922. The plaintiff was to be in possession of the lands as rehandar which were also hypothecated in simple mortgage by way of security. Elahi Bux agreed to hold the land on manhunda rent of 75 maunds of paddy each year for the years 1330–1334. The suit was contested by the appellant on the ground that the zarpeshgi was illegal and void as being due to undue influence and pressure and the kabuliyat was quite illegal, null and void for the same reason. This defence found favour with the learned Munsif and he dismissed the suit. In the appeal the learned Subordinate Judge held that there was a relationship of landlord and tenant created by the kabuliyat which was not vitiated by any undue influence on the part of the plaintiff. As to the consideration of the zarpeshgi he held that

    “whether it was paid in cash or was set of against the commission agreed upon between Elahi Bux and the plaintiff to be paid to the latter for negotiating an advance of a loan of Rs. 40,000 with Hardi Babus in whose service he was, did not arise, inasmuch as even in the latter case the consideration to pay the commission agreed upon was a valid consideration”

    2. And on these findings he decreed the plaintiff's suit.

    3. The learned advocate for the appellant contended that the zarpeshgi and the kabuliyat formed part of the same transaction and that no relationship of landlord and tenant had been created and the suit accordingly was not maintainable under the Bengal Tenancy Act. I do not think this contention is sound and the point seems to have been settled by authority. A similar question came to be considered in Chimman Lal v. Bahadur (1) and their Lordships held that the mortgage and the lease were two distinct transactions and a suit on the kabuliyat would be only in a revenue Court and it could not be held that the lease was granted simply for the mere realization of the amount of interest payable on the mortgage. No reference was made to the lease in the usufructuary mortgage and the lease in its turn in no way purported to be dependent on or to be a part of the mortgage transaction, and the mere fact that the two deeds came to be executed on the same date would not affect the matter at all. This decision was referred to with approval in Uttam Chandra Daw v. Raikrishna Dalal (2) and reference may be made to the observations of Mookerjee, J., at p. 405 of the report:

    “It would be an abuse of language to maintain that the suit was for recovery of arrears of interest on the mortgage. Two instructive cases on this point are furnished by the decisions in Anon (3) and Chimman Lal v. Bahadur Singh . In the first of these cases, a mortgage and a lease were executed simultaneously. Sir John Edge, C.J, observed that the grant of such a lease by the mortgagee to his mortgagor had been invariably treated as a transaction in the nature of a lease and as putting the parties in exactly the same position as that in which they would have stood, if instead of having been mortgagor and mortgagee they were the zamindars and any other person taking a lease of the land. In the second case, precisely the same view was adopted, and it was ruled that the effect of the kabuliyat was to establish between the parties the relationship of landlord and tenant with the result that a suit on the kabuliyat would be only in a revenue Court. A similar view was taken in Khuda, Baksh v. Alimunnissa (4).”

    4. Chatterji, J., was of the same view as is clear from his observations at p. 412 of the report:

    “It is true the arrangement was that the share of the crops, which the mortgagee would get from the mortgagors, would be appropriated as interest on the mortgagee, but the legal relation between the parties after the execution of the kabuliyat was that of landlord and tenant. Had the mortgagee let out the land to a third party it could not be contended that the share of crops payable under the kabuliyat was not rent, even though the same might be appropriated towards interest. The mere fact that the lands were let out to the mortgagor would not after the relation between the parties.”

    5. I am not unmindful that in Tilakdhari Singh v. Chaturgun Bind, A.I.R 1925 Pat. 118 their Lordships came to hold that a zarpeshgi was an instrument of mortgage and not a lease, but all the same they did not dissent from the Calcutta view as the facts in the Calcutta case entirely supported the finding that the morgagor became a raiyat by reason of the terms of Section 5 of the Ben. Ten. Act, which read together with the definition of “proprietor” in the Act which includes a trustee; but all the same their Lordships decreed the claim of the zarpeshgidar for the rents which had been agreed to be paid by the kabuliyat in favour of the mortgagee stipulating the payment of the rent.

    6. The learned advocate next contended that though the learned Munsif had on reasons given held that the zarpeshgi bond was not for any cash advance and that the consideration for it was nothing but commission which the plaintiff had managed to extort from Elahi Bux on undue influence and pressure, the learned Subordinate Judge had not come to any distinct and definite finding on the point, and accordingly his judgment was not a proper judgment in accordance with the law and his findings were liable to be challenged even in second appeal. He referred to Illus. (j) in Section 23 of the Contract Act, and to Harrington v. The Victoria Bathing Dock Company (5) and argued that as the promise to pay the commission was immoral and opposed to public policy the zarpeshgi bond could be avoided by the heirs of Elahi Bux deceased. In my view this contention is equally unsound. The learned Subordinate Judge had come to a distinct finding that the defendants failed completely to adduce satisfactory evidence to prove that the zarpeshgi bond was not executed for consideration; that bond had been executed on 31st October 1922, but the zarpeshgi deed which was executed by Elahi Bux in favour of the Hardi Babus was dated much earlier, namely 26th August 1922, and accordingly the whole story of the defendants that unless the zarpeshgi bond in favour of the plaintiff was executed, he would put obstacles in the way of completing the transaction between Elahi Bux and the Hardi Babus was absolutely false. There could not have been any pressure or undue influence on the part of the plaintiff in getting the zarpeshgi bond and the kabuliyat executed in his favour when really the transaction between Elahi Bux and the Hardi Babus had been completed two months before the zarpeshgi bond in favour of the plaintiff was executed and registered by Elahi Bux. From the whole evidence and circumstances, he was not at all satisfied that the zarpeshgi bond in favour of the plaintiff was vitiated by any undue influence. There is accordingly a clear finding of fact which is binding on this Court and cannot be re-agitated in second appeal. Reference to the Illus. (j), Section 23 of the Contract Act, and to the case cited is also, in my view, out of place. It was not shown that the plaintiff was induced by the offer of any reward or commission so as to derelict him from doing his proper duties as a servant of his masters the Hardi Babus and there is no moral turpitude which came into play to vitiate the promise to pay the alleged commission agreed to be given on the ground that it was immoral and opposed to public policy. The law has already settled certain definite rules and the Courts should not invent a new head of public policy: Janson v. Driefonteir (6). Lord Halsbury observed in Equitable Life Assurance Co. v. Reed (7): “I deny that any Court can invent a new head of public policy.” The Courts ought to be very cautions in deciding a question of public policy. It is no doubt true that with the development of public opinion and morality, the doctrine must be applied with necessary variation as is observed in Srinivas v. Ramchandra (8). But all the same each case has to be decided on its own facts. There was nothing immoral in agreeing to pay a commission to an agent of the maliks who had facilitated the transaction of the heavy loan advanced to Elahi Bux and the consideration would be valid as found by the learned Subordinate Judge in appeal. The facts did warrant the plaintiff in this case being entitled to a decree. The manhunda rent for the years in suit had not been paid. But then the question remains as to whether he should be allowed a decree at the rate of Rs. 300 per year in lieu of the fixed paddy rent agreed to be paid. Though in the kabuliyat it had been stipulated that in case the fixed paddy rent was not paid the plaintiff would be entitled to recover at the rate of Rs. 300; yet in my view the plaintiff cannot justly recover any higher value for the paddy rent than its price in the market during those years. The learned advocates on both sides are agreed that the market value of 75 maunds of paddy during the years in suit was on the average Rs. 180 a year. Though 25 percent damages had been allowed, having regard to the facts I would reduce it to 12½ percent.

    7. The result is that the decree of the Subordinate Judge will be modified and confirmed in other respects to the extent above noted and a decree for the plaintiff should be entered accordingly.

    8. The plaintiff's suit will accordingly be decreed modifiedly with proportionate costs throughout in all the Courts, the appellant bearing his own costs.

    Fazl Ali, J.:— I agree with the conclusions-of my learned brother as well as to the order proposed by him.

    R.M/R.K

    9. Decree modified.

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    Comments

    Abdul Rahim v. Raghunath Sukul
    (Aug 4, 1930)