Makhan Lal Marwari v. Hanuman Baksh Marwari

Mullick, J.:— A debt of Rs. 734-10-6-was due from the defendant to the plaintiff on a khata account. On 6th Magh 1315, which corresponds to some time in January 1908, the defendants executed a mortgage-deed in favour of the plaintiff, of which the consideration was the above debt of Rs. 734-10-6 and an additional sum of Rs. 765-5-6 which was to be advanced by the plaintiff in cash. The deed was duly registered. The plaintiff, however, failed to pay to the defendant this-additional sum, and on 30th July, 1909 the defendant wrote to the plaintiff calling upon him to complete the payment and to take back from the defendant the-mortgage-bond which had been left in the defendant's custody. On 7th January, 1909-the plaintiff replied that he had found by enquiry that the property mortgaged was-not worth more then Rs. 734, that he therefore declined to advance the balance of Rs. 765.5-6, and that he would hold the property liable for the aforesaid debt of Rs. 734-10-6. It appears that the defendant did nothing for a period of nearly four years after that, and on 11th August, 1903, the plaintiff brought the present suit to enforce his mortgage for the sum of Rs. 734-10-6. The Subordinate Judge decreed the suit. On appeal that decree was affirmed by the Additional District Judge. In second appeal before us it is contended on behalf of the defendant that the plaintiff is only entitled to a personal decree for Rs. 734-10-6 and that inasmuch as he failed to pay the full amount of the consideration of the mortgage bond, he cannot obtain a decree for sale upon the mortgage and proceed against the property. Now the first question that arises is. Was the mortgage completed or not at the time of registration? On behalf of the defendant-appellant before us, it is contended that the transaction was not complete and that a condition was attached to the effect that it would be only completed and operative upon the payment of the balance of Rs. 765-5-6. The reply to this is that prima facia the document created an interest in the property from the moment of registration and that, if there was a condition to the contrary, the onus of proving such a condition is upon the defendant.

2. There is authority for the proposition no doubt that mere-registration does not render a sale of immovable property or a mortgage operative from the time of registration if there is a condition attached to the contract that the operation of the transfer is to be postponed till the actual payment of the full amount of consideration. But in every such case the onus is upon the party setting up such a condition, and in the present case the defendant cannot escape from the burden which the law imposes upon him. But what has he done? The plaintiff has called one witness to prove why the mortgage-bond was allowed to remain in the custody of the defendant: he has admitted that the consideration was Rs. 734-10-6 plus Rs. 765-5 and that the bond was to be taken back upon payment of the latter sum: but he has nowhere admitted that the contract was not to create a valid interest in the property from the moment of actual registration. The defendant, on the other hand, has neither examined himself nor adduced any evidence to show that any such condition was attached to the contract, and, in my opinion, he has altogether failed to discharge the burden which rested heavily upon him. The transfer therefore, being a valid transfer and having created a valid interest in the mortgaged property, what is the position of the defendant? Can he, when the plaintiff sues upon his mortgage, rely upon Section 39 of the Contract Act, and say that he rescinds the contract because the plaintiff has failed to perform his promise in its entirety? In my opinion Section 39 of the Contract Act, has no application to the case.

3. The registration of the mortgage-bond transferred an interest in the property to the plaintiff. The transfer, though arising out of a contract, cannot be properly called a contract. Therefore the provisions of the Contract Act, notwithstanding the terms of Section 4 of the Transfer of Property Act, do not assist the defendant. This was the view taken in Rashik Lal v. Ram Narain(1). In that case Karamat Hussain and Chamier, JJ., held that Section 39 of the Contract Act, was not applicable to the case of a mortgage in which an interest in the property had passed. In the course of his judgment the former learned Judge referred to the case of Subba Ran v. Devu Shetti(2), in which there was an expression of opinion to the effect that the mortgagor had a right to cancel the contract if the mortgagee failed to perform his promise in its entirety with regard to the payment of the consideration money. But the learned Judge, quoting with approval the remarks of Farran, C.J, in Tatia v. Babaji(3), came to the conclusion that a transfer by mortgage differs from a contract, that Section 39 of the Contract Act does not, therefore, apply and that the mortgagor cannot avail himself of the provisions of that section for the purpose of rescinding the mortgage. In Munshi Bajrangi Sahai v. Udit Narain Singh(4), Maolean, C.J, declined to go into the question whether it was open to the mortgagor in such a case to rescind the contract, but he based his decision upon the ground that where a mortgagor does not demand from a mortgagee the payment of the balance of the consideration money and where there is no evidence that the mortgagee ever refused to pay it, the mortgage was a good mortgage so far as the sum actually advanced was concerned. But in Rashik Lal v. Ram Narain, above cited, the position is very clearly stated by Chamier, J., who made the following observations while agreeing generally with Karamat Hussain, J.:—

“I am not prepared to say that the Court is hound in every case to enforce the mortgage according to the letter where the whole of the mortgage-money has not been advanced. For example, where the mortgagee sues for possession, he may, I think, be required to pay the balance of the mortgage-money, before he takes out, execution of his decree, and there may be other cases in which he may properly be put upon terms. In the present case there seems to be no reason for not passing a decree as prayed. Under the decree, the appellant mortgagor will be given an opportunity of repaying the amount which he received from the mortgagee. Even if the mortgagor in such a case is entitled to rescind the mortgage, he can do so only upon repaying the amount advanced to him.”

4. The general rule that a mortgage does not cease to be enforcaable merely for failure of part of the consideration, has been accepted by the Bombay High Court in Bhagbai v. Narayan Gopal(5), and in Motichand v. Sagun(6), in the latter of which cases it was observed that the mortgagor's remedy was to sue for the balance of the consideration and damages. The Calcutta High Court in Rajani Kumar Dass v. Gaur Kishore Shaha(7) took the same view. On the other hand a Full Bench of the Punjab Chief Court held in Gokul Ghand v. Rahman(8) that failure of a part of the consideration leads to failure of the whole mortgage. The basis of this view is that a contract to mortgage is indivisible and enforceable only in its entirety.

5. In Madras the view taken in Subba Rau v. Devu Shetti, Tirumal Raju v. Pandla Muthial Naidu(9), Subbaraya Beddi v. Manikka Koundan(10) appears to be that Section 39 of the Contract Act, applies and that the mortgagor has a right to elect whether he will put an end to the contract or acquiesce in its continuance. But it is to be noted that in Tirumal Raju v. Pandla Muthial Naidu the learned Judges appear to have declined to apply the section to a mortgage in which part of the consideration is discovered to be void, for they held there that the plaintiff was entitled to enforce his mortgage for the principal money actually paid, and that in Subba Rau v. Devu Shitti, although expressing an opinion that Section 39 of the Contract Act, was applicable, the Court based its decision on a different ground, namely, that the plaintiff had acquiesced in the cancellation of the mortgage.

6. The case of Subbaraya Reddi v. Manikka Koundan no doubt goes the whole length of the appellant's contention, but with great deference, I think the correct view is that taken by the Allahabad High Court in Rashik Lal's case. I see no difference between failure of consideration by reason of its being found to be partially void and failure by reason of refusal on the part of the mortgagee, so far as the application of Section 39 of the Contract Act, is concerned. In my opinion that section is wholly inapplicable in either case. The question next arises whether the defendant has an equitable ground of defence. Now the subsequent conduct of a promiser is sometimes a ground for the rescission of a contract; but it is settled law that failure to perform a promise which formed the whole or part of the consideration inducing an executed conveyance gives one no right of rescission. In Brownlie v. Campbell(11) Lord Salborne observed that to entitle a party to the rescission of a conveyance after its completion he must make out a case of misrepresentation and fraud or prove an error “in substantialions” sufficient to annul the whole contract. Here no such ground has been shown.

7. In this case, therefore, the defendant is entitled to raise neither a legal defence under the statutory provisions of the Contract Act nor an equitable defence. In my opinion, the rule stated by the Punjab Chief Court in Gokal Chand's case is too wide and must be restricted to cases where the parties agree that the mortgage will not be operative till the full amount of consideration has been paid. Such a condition is not a necessary part of every mortgage. The defendant finally relies upon the case of Nil Madhab Parhi v. Haran Prosad Parhi(12). But that case does not assist him. In that case it was held that in regard to a deed of sale of immovable property it was necessary to ascertain whether there was only intention that the deed should not operate till the payment of the full consideration money, and that it was open to the Court, after finding that the transfer was operative in-spite of the non-payment of the full consideration money, to make an equitable adjustment as regards the balance of the purchase between the vendor and a subsequent purchaser. But in this case I have already found that the defendant has failed to establish that there was any condition postponing the operation of the mortgage-deed. In my opinion the present case must be decided upon the principles followed in Rashik Lal's case by the Allahabad Court. As it is not inequitable that the defendant should be called upon either to redeem for Rs. 734-10-9 or to have his property sold in execution of the mortgage-bond, the plaintiff is entitled to succeed. The appeal, therefore, will be dismissed with costs.

8. Jwala Prasad, J.:— I agree. The plaintiff was entitled to treat the mortgage as in full force with all the conditions and stipulations laid down in the bond in respect of the money due to him on the foot of the bond in suit. The mere non-payment of a portion of the consideration money does not render the bond inoperative or invalid. The exeexecution and the registration of the bond created in favour of the mortgagee a transfer of interest in the property mortgaged to him, unless there was an intention on the part of the parties that the terms of the bond will not be given effect to until the entire consideration money was paid. This intention is to be proved in each case. In the present case there is no evidence nor any circumstances which would entitle the defendant to a finding that there was such an intention between the parties as to render the bond ineffective and inoperative on account of the non-payment of the full consideration money. The subsequent conduct of the defendant leaves no manner of doubt that he never intended to, and in fact he never did, rescind the contract.

9. In the notice dated 30th July, 1909 long after the execution of the mortgage bond, he nowhere said that the contract was rescinded by him, whereas in the reply to that notice given by the plaintiff it was definitely stated that the mortgage shall be treated to be in full force in respect of the money already due to him. Even after the receipt of that reply in August 1909 the plaintiff did not show any intention on his part to rescind the contract. In my opinion, the mortgage bond and the interest created in favour of the mortgagee by the bond is in full force and the mortgagee is entitled to a mortgage decree for the amount due to him. I need hardly go over the authorities and the law on the point. They have been fully dealt with by my learned brother. I agree with him entirely in all that has been said by him and I would, therefore, dismiss this appeal with costs.

V.S/R.K

10. Appeal dismissed.