Balasundara Naicker v. Ranganatha Aiyar

1. The suit out of which this appeal arises was filed on the footing of a mortgage bond, Exhibit A, for Rs. 8,000, dated 11th January, 1903, executed in favour of four persons, namely, (1) father of 3rd plaintiff, (2) father of 17th defendant, (3) father of 2nd plaintiff, and (4) the 1st plaintiff, by defendants 1 to 3 and their undivided father. 4th defendant is the son of the 1st defendant. Defendants 5 to 9 are sons of 2nd defendant. Defendants 10 to 16 are subsequent vendees and mortgagees of defendants 1 to 9. The four obligees of the bond belong to one family. The first two belong to one branch of the family. The third and the fourth who are sons of brothers belong to another branch. The two branches were separated even before 1909. Under the terms of the mortgage bond, the interest was to be paid at 9 per cent, per annum on the 11th January of each year, and if it was not so paid the interest should be compounded and bear further interest at 10 1/2 per cent, per annum with annual rests. The whole amount was to be paid on 11th January, 1906. In default, it should carry further compound interest at 10 1/2 per cent, per annum with annual rests. Some amounts were paid on 2nd May, 1905, 31st August, 1905, 21st October, 1905 and 12th November, 1905 and were all endorsed on the bond on the last of these dates. Again some amount was paid on 15th April, 1906 and 19th January, 1907, and these payments were endorsed on the latter date. In the year 1909 there was some litigation between the 3rd plaintiff and the 17th defendant. This was O.S. No. 3 of 1909. That was a suit filed by the 17th defendant against the 3rd plaintiff for partition of the properties belonging to their branch. Pending the suit two Receivers were appointed in October, 1909, for the purpose of collecting the assets due to the family. The Receivers were vakils of the Sub-Court of Maya-varam at Kumbakonam, where the suit was filed. In 1912, while the suit was pending, the Court was transferred to Mayavaram, but before the transfer the Receivers had collected more than one lakh and fifty thousand rupees and they were discharged in April, 1912. One of the debts which they collected as Receivers was the debt due on the suit mortgage bond. As the debt was due not only to the two parties in that suit but also to two others, namely, plaintiffs 1 and 2, the collection was made with the co-operation of the two persons. The 3rd plaintiff is a natural son of the 2nd plaintiff but was adopted into a different branch, and the 2nd plaintiff conducted O. S. No. 3 of 1909 on behalf of the defendant therein, namely, the present 3rd plaintiff. In his evidence, he admits that he used to go to the Receivers whenever sent for, and that in respect of the realisation of the common debts the Receivers used to consult him and the 1st plaintiff. There is no doubt, therefore, that the work of collection was made by the Receivers with the co-operation of plaintiffs 1 and 2. The defendants' case now is that the Receivers filed some suits and the debtors pleaded in those suits that the provisions regarding interest were penal and unenforceable. The Receivers compromised those suits agreeing to some reasonable rate of compensation and not insisting on the original rate of interest in the bond. This was done with the sanction of the Court. Similarly, in respect of the present suit bond, the Receivers and plaintiffs 1 and 2 agreed to take interest which would roughly work out compound interest at 9 per cent, per annum and did not insist on the higher rate of 10 1/2 per cent, per annum. They calculated the amount due on the bond on that footing and found that nearly a sum of Rs. 12,960 was due up to 20th March, 1911. The amount was to be paid by the various obligors of the bond in proportion to their respective shares, they themselves being divided. Accordingly, the following sums were paid towards the suit mortgage bond, namely, (1) Rs. 4,300 on 29th March, 1911, by the 1st defendant, (2) Rs. 4,300 on the same date by the 3rd defendant, (3) Rs. 2,000 by 2nd defendant on the same date, and (4) Rs. 2,000 on 12th April, 1911 by the 2nd -defendant. There still remained due a sum of Rs. 360 which was afterwards paid by the 2nd defendant. These payments were accepted in full discharge of the debt due on the mortgage bond, Therefore the defendants pleaded that there is nothing due on the mortgage. The Subordinate Judge accepted the defendants' plea and dismissed the suit. The plaintiffs appeal.

2. On behalf of the appellants it was contended that there is really no evidence to support the agreement and the subsequent discharge as pleaded by the defendants.

3. [The judgment then discusses the evidence on the point and concludes]

4. Having regard to all the circumstances of the case, we are inclined to believe as a question of fact the plea raised by the defendants that the obligees of the bond took Rs. 12,960 in 1911 in complete discharge of the mortgage bond. It is immaterial on what basis the amount was really arrived at. But it adds a little more to the probabilities of the case that it works out practically to the sum due on the footing of 9 per cent, compound interest.

5. It is next argued by the learned Advocate for the appellants, that, assuming all the facts are in favour of the defendants, such a plea as that raised by the defendants is futile as the evidence adduced to support such a plea is inadmissible in evidence with reference to Section 92, clause 4 of the Evidence Act. He relied on Yegnanarayana Aiyasr v. Suppan Chetti (1926) 52 M.L.J. 224, a decision of our brother, Waller, J. We are informed that the decision is now under appeal under clause 15 of the Letters Patent. But we can consider the authorities relied on in that case. Waller, J., has relied on the following cases:

(1) Namagiri Lakshmi Animal v. Srinivasa, Aiyangar (1914) 27 I.C. 269. In this case what was held by Seshagiri Aiyar, J. and Kumaraswami Sastriar, J., was that an endorsement on a mortgage bond reciting that the bond was cancelled and returned as the amount due was paid was inadmissible in evidence. In that case the endorsement was made with a view to defeat creditors though the amount was not really received, and it was found that the endorsement was not admissible with reference to the language of Section 17 (n) of the Registration Act.

(2) Lakshmana Setti v. Chenchuramayya (1917) 34 M.L.J. 79. Here also the defendants relied on an agreement in writing by the mortgagee to relinquish a sum of money more than Rs. 100 due under the mortgage bond and it was held that it was inadmissible for want of registration under Section 17.

(3) Mallappa v. Matum Nagu Chetty (1918) I.L.R. 42 M. 41 : 35 M.L.J. 387. This was a judgment of three Judges on a Letters Patent Appeal and they unanimously held that a subsequent oral agreement to take less than what was due under the registered mortgage bond being admitted in the pleadings could be considered in the case and on this ground the appeal was dismissed and the mortgagee failed and the further remarks in the judgment with reference to Section 92, clause 4 are strictly obiter dicta but we agree that an oral agreement to take less than what is due under a registered mortgage bond would be inadmissible under Section 92 (4).

(4) Jagannath v. Shankar (1919) I.L.R. 44 B. 55, which is a case like the present one supporting the appellant.

6. With reference to the first two cases we observe that the question in them is whether a writing purporting to extinguish a mortgage bond was admissible under the Registration Act and it was held it was not admissible. In the case before us there is no question of any writing being admissible or inadmissible with reference to the provisions of Registration Act. If the writing itself does not purport to extinguish the mortgage bond it would be admissible in evidence, and a plea of discharge based on the fact that the sum shown in the endorsement was taken in full discharge and the discharge was given to the obligors orally would stand on a different footing from the admission of a writing evidencing the payment. This is the view taken in Neelatnani Patnakk Mussadi v. Sukaduvu Beharu (1920) I.L.R. 43 M. 803 by Spencer and Krishnan, JJ. In Gopala swami Aiyar v. Kalyana Rangappa (1924) 48 M.L.J. 155 Venkatasubba Rao and Srinivasa Aiyangar, JJ., went further and held that an endorsement and a receipt purporting to completely discharge the debt were admissible in evidence. It is unnecessary for us to go so far though possibly their decision also may be supported.

7. As to the third decision relied on by Waller, J., namely, Mallappa v. Matum Nagu Chatty (1918) I.L.R. 42 M. 41 : 35 M.L.J. 387 that decision really supports the respondent for it shows the possibility of the mortgage being extinguished by the payment of a smaller sum than that due on the bond.

8. As to the last case Jagannath v. Shankar (1919) I.L.R. 44 B. 55 we see that it has been dissented from in the Calcutta High Court (1) in Mohim. Chandra Dey v. Ranidayal Dutta (1925) 30 C.W.N. 371 by Greiaves and Ghose, JJ., where they held that no oral evidence to prove a discharge is admissible and again (2) in Srimati Bhaba Sundari v. Ram Kamal Dutta (1925) 44 C.L.J. 269 by Greaves and Panton, JJ. The question that now arises before us is whether we should follow the two Calcutta cases or the Bombay case. For this purpose we have to consider the three provisions of law, viz., (1) Section 63 of the Contract Act, (2) Section 17 of the Registration Act, and (3) Section 92, clause 4 of the Evidence Act. The first of these shows that a creditor in India can remit the balance of a debt : without any consideration. Where the debt is a mortgage debt, it may be that a document in writing purporting to extinguish the mortgage is inadmissible in evidence under the Registration Act, but the payment itself cannot be inadmissible, and if a creditor agreed to take the payment as a complete discharge, that is, not only promises, previously to the payment, to take it in complete discharge but at the time of the payment gives a discharge, the question arises" whether such a discharge is an agreement within Section 92, clause 4 of the Evidence Act. There is no doubt that any agreement which seeks to substitute terms different from those in the bond so as to enable the mortgagor to insist on the working out of the obligations on the line of the substituted terms would be inadmissible. Strictly, therefore, an agreement promising the debtor that he would be discharged if he makes a certain payment less than that indicated on the mortgage bond is, standing alone, inadmissible to prove the discharge itself, both under Section 92 (4) and also otherwise, for such an agreement is without consideration. What Section 63 of the Contract Act permits is not and agreement to remit but an actual remission. That is, when a portion of the sum is paid, the creditor may say, "I do not want the rest. You need not pay any more." This last thing is, therefore, the essence of the transaction. A discharge extinguishing a debt though in receipt of a smaller sum than that strictly due is not an agreement substituting different terms for the original terms which will govern the further working out of the obligation but an extinction of the obligation itself. Though such a discharge extinguishing a debt is generally effected by creditors on the importunity or the request of the debtors, still it cannot be said to amount to a contract which binds two persons and put them to further obligations. Where there is nothing more to be done, the whole thing is practically an act of grace on the part of the creditor. The request of the debtor is immaterial and in law it is not a case of consensus of two minds ending in a contract but merely a liberal act on the part of the creditor only. Looked at from this point of view we think that Section 92 (4) does not touch any act of a creditor which extinguishes a debt by taking a smaller sum of money. We agree with the view taken by Greaves, Panton and Ghose, JJ., in the two Calcutta decisions above mentioned, and dissent from the decision in Jagannath v. Shankar (1919) I.L.R. 44 B. 55. Where the act of the creditor does not extinguish the debt but gives only better terms than before which have yet to be worked out, the principle does not help the debtor and Section 92 (4) prevents the admission of such an agreement. The observations of the Privy Council in Firm Chhunna Mal Ram Nath v. Firm Mool Chand Ram Bhagat (1928) L.R. 55 I.A. 154 : 55 M.L.J. 1 at 6 (P.C.) disapproving the decision in Abaji Sitaram v. Trimbak Municipality (1903) I.L.R. 28 B. 66 shows that a remission of a debt under Section 63 is not an agreement between two persons. It is really the act of one person discharging at his will and pleasure the obligation of another. There is also the view of our brothers Madhavan Nair and Curgenven, JJ., in Ramanathan Cheltiar v. Sethuram Madige Rao Sahib (1927) 27 L.W. 47, where they observe the discharge of a debt is different from extinguishment of a mortgage, though one may be the result of the other. We think, therefore, the plea is admissible and, once the plea is admissible, whether it is actually proved is merely a matter of evidence on the facts appearing in a particular case. We have already found, as a question of fact, that there is a complete discharge of the debt. The extinction of the mortgage followed the discharge of the debt. We therefore dismiss the appeal with costs.