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AMICUS AI
Citation Codes
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Case Number
Attorney(S)
  • Mr. S. Rangaswamy Aiyangar for the Plaintiff
  • Messrs. Vere Mockett and T. S. Viswanatha Aiyar for the Defendant.
Judges
  • Beasley, J.
Acts
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Cites
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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Mr. S. Rangaswamy Aiyangar for the Plaintiff
  • Messrs. Vere Mockett and T. S. Viswanatha Aiyar for the Defendant.
Judges
  • Beasley, J.
Acts
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Smart Summary

Structured Summary of the Provided Opinion

Factual and Procedural Background

The defendant was indebted to the plaintiff for approximately Rs. 62,000 as his ascertained share of partnership losses. To secure this liability the defendant executed a promissory note dated 26 May 1923 and on that day also executed a memorandum of agreement reciting an agreement to deposit title-deeds by way of equitable mortgage to secure repayment. On 27 May 1923 the defendant sent a letter accompanying the title-deeds, stating his intention to deliver and deposit the deeds in accordance with the memorandum. The plaintiff commenced suit. The plaint was subsequently amended to claim a personal decree against the defendant for Rs. 71,837-5-6 due on the promissory note (as set out in paragraph 4 of the plaint). The defendant raised defences: (a) that the memorandum and the letter required registration and, being unregistered, could not be admitted in evidence; (b) that the promissory note was in the name of A.R.A.B.S.M. Somasundaram Chettiar and had not been endorsed to the plaintiff, so the plaintiff could not sue on the negotiable instrument without endorsement or a succession certificate; and (c) that the defendant was entitled to credit for three promissory notes amounting to Rs. 17,700 which had been executed in his favour and endorsed by him to the plaintiff.

Legal Issues Presented

  1. Whether the memorandum of agreement dated 26 May 1923 and the letter of 27 May 1923 must be read together and, if so, whether those documents taken together purport to create a charge upon immovable property such that they require registration under Section 17(1)(b) of the Registration Act and, being unregistered, are inadmissible in evidence.
  2. Whether the plaintiff (a surviving member of a joint Hindu family) can sue on the promissory note made in the name of the managing member (A.R.A.B.S.M. Somasundaram Chettiar) without endorsement of the note and without a succession certificate.
  3. Whether the defendant is entitled to credit for three promissory notes amounting to Rs. 17,700 that had been endorsed by him to the plaintiff.

Arguments of the Parties

Plaintiff's Arguments

  • The plaintiff relied on authorities (including Velauakauya Krishnayya v. Ponnuswami Ayyar) to support admissibility/interpretation, and argued the circumstances demonstrated a contract and deposit in accordance with the memorandum.
  • In respect of the negotiable instrument, the plaintiff relied on pleadings and evidence that the debt arose in the course of a joint Hindu family business managed by Somasundaram Chettiar, to support the right of the surviving family members to sue on the promissory note.

Defendant's Arguments

  • The defendant contended that the memorandum of agreement (26 May) and the letter of 27 May must be taken together as the contract, and that the combined document purported to create a charge on immovable property; consequently, under Section 17(1)(b) of the Registration Act the document required registration and, being unregistered, could not be admitted in evidence.
  • The defendant argued that the promissory note was payable to A.R.A.B.S.M. Somasundaram Chettiar and had not been endorsed to the plaintiff; being a negotiable instrument, the Negotiable Instruments Act permits suit only by the holder (i.e., after endorsement) or in specified instances by legal representatives, and that a succession certificate would be necessary before the plaintiff could sue.
  • The defendant claimed entitlement to credit for three promissory notes totaling Rs. 17,700 that had been executed in his favour and endorsed by him to the plaintiff.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Velauakauya Krishnayya v. Ponnuswami Ayyar, A.I.R. 1924 Mad. 547 Interpreted as a decision where a subsequent document merely recorded an already created charge (document was in past tense). The court noted this decision was relied on by the plaintiff but distinguished it because in the present case the memorandum was an agreement to create a charge followed by a letter effecting the deposit; thus the facts were different and the past-tense emphasis in that case did not apply here.
Subramaniam v. Lutchman, A.I.R. 1923 P.C. 50 (Privy Council) Held that certain words were sufficient to create a charge upon immovable property (title-deeds handed over "to be held as security"). The court regarded this Privy Council decision as concluding that the words used (similar to those in the present documents when taken together) created a charge; accordingly the court followed the Privy Council and held the documents required registration and, being unregistered, could not be received in evidence.
Muthiah Chetty v. Kothandaramaswami Chetty [1916] 31 M.L.J. 347 Authority cited on related issues (content not fully set out in the opinion). The court observed this decision appeared somewhat to conflict with the Calcutta/Privy Council decision, and since it was prior and not binding over the Privy Council decision, the court did not follow it.
Vyravan Ghettiar v. Sreenivasa Chariar, A.I.R. 1921 Mad. 68 Held that no succession certificate was required where a suit is brought by surviving members of a joint Hindu family unless the suit concerns separately acquired property. The court applied this authority to hold that the plaintiff, as surviving members of a joint Hindu family, could sue on the promissory note given to the managing member without an endorsement or a succession certificate because the debt related to joint family business (not separately acquired property).
Kuttia Pillai v. Ranganadham [1915] 28 M.L.J. 323 Authority concerning rights of surviving members of a joint Hindu family in suits on documents given to the managing member. The court cited this case (and another) as supporting authority that surviving members can sue to take the benefit of a promissory note given to the managing member in respect of moneys advanced out of joint family funds.
Ramanatham Chetti v. Subramanyam Chetti [1915] 28 M.L.J. 372 Authority concerning similar principles for joint family suits on documents given to the managing member. Used alongside Kuttia Pillai to reinforce the court's conclusion that the plaintiff, as surviving family members, could sue on the promissory note without endorsement or succession certificate.

Court's Reasoning and Analysis

The court proceeded in a sequence of analytical steps grounded in the pleaded facts and documentary record:

  1. Nature and timing of documents: The court identified two relevant instruments — (a) the memorandum of agreement dated 26 May 1923 (an agreement to deposit title-deeds by way of equitable mortgage to secure repayment), and (b) the letter dated 27 May 1923 which accompanied the actual delivery of the title-deeds. The court held the two documents must be read together: the first being an agreement to deposit, the second effecting the deposit in accordance with that agreement.
  2. Registration requirement: The court considered whether the combined documents purported to create a charge on immovable property. If so, they would fall within Section 17(1)(b) of the Registration Act and require registration. The court concluded that taken together the documents did create a charge on immovable property.
  3. Admissibility: Because there had been no registration of the contract reduced to writing, the court held that the documents could not be received in evidence under the statutory scheme (i.e., an unregistered document imposing a charge on immovable property is inadmissible).
  4. Precedential analysis on charge creation: The court distinguished Velauakauya Krishnayya v. Ponnuswami Ayyar on the ground that that decision concerned a document which merely recorded an existing charge and was phrased in the past tense. The court regarded the Privy Council decision in Subramaniam v. Lutchman as directly applicable: similar words there were held sufficient to create a charge, and being bound by the Privy Council, the court followed it.
  5. Amended plaint and negotiable instrument issue: With the plaint amended to claim on the promissory note, the court addressed the defence that the note was in the name of the deceased managing member and not endorsed to the plaintiff. The court examined earlier pleadings (a plaint in C.S. No. 358/24 filed by the present defendant when he was plaintiff) and found it established that the debt arose in the course of a joint Hindu family business managed by Somasundaram Chettiar.
  6. Ability to sue without endorsement/succession certificate: Applying Vyravan Ghettiar v. Sreenivasa Chariar and the two 1915 M.L.J. authorities, the court concluded that where a promissory note relates to joint family business (not separately acquired property), surviving members of the joint Hindu family can sue on a document given to the managing member without an endorsement or succession certificate.
  7. Credit for endorsed promissory notes: Regarding the defendant's claim to credit for three promissory notes amounting to Rs. 17,700 which he had earlier endorsed to the plaintiff, the court examined the document executed at the time of endorsement and found the plaintiff had complete liberty to deal with those promissory notes as he desired (including not suing on them or suiting for lesser sums). The notes were found to be valueless; upon plaintiff obtaining decree they would be handed back to the defendant. Therefore the defendant was not entitled to offset them in a way that would defeat the plaintiff's decree.

Holding and Implications

Holding:

There will be a decree for the plaintiff for Rs. 86,293-10-8 with costs and interest at 6% from this date till date of realization.

Implications / Consequences:

  • The memorandum of agreement (26 May) and the letter (27 May), taken together, were held to create a charge upon immovable property and therefore required registration under Section 17(1)(b) of the Registration Act; being unregistered they could not be received in evidence for the purpose of creating or proving that charge.
  • Notwithstanding the inadmissibility of the unregistered documents creating the charge, the plaintiff (as surviving member(s) of the joint Hindu family) was permitted to sue on the promissory note given to the deceased managing member without an endorsement or a succession certificate because the debt related to joint family business (applying Vyravan Ghettiar and related authorities).
  • The defendant's claim for credit in respect of the three promissory notes (Rs. 17,700) did not defeat the plaintiff's claim: the plaintiff had liberty to deal with those notes and they were valueless; upon decree those notes would be returned to the defendant.
  • The court applied and followed existing authorities (including the Privy Council decision in Subramaniam v. Lutchman) in reaching its conclusions; the decision operates to resolve the parties' rights in this suit as described above.
Show full summary ...

    A.R.A.R.S.M. Arunachallam Chetty v. C. Jagannatha Pillai

    1. The facts in this case are briefly as follows: The defendant was indebted to the plaintiff in the sum of Rs. 62,000 odd in respect of partnership dealings, that being his alleged ascertained share of losses of the partnership. In respect of that Rs. 62,000, the defendant executed a promissory note and having executed the promissory note on 26th May 1923 he entered into an agreement which is called memorandum of agreement relating to the deposit of title-deeds and in that agreement it is recited amongst other things after setting out the ascertained liability of the defendant:

    Whereas the said C. Jagannatham Pillai has further agreed to deposit the title deeds relating to his properties his properties are then described by way of equitable mortgage to secure the repayment of the amount and interest covered by the promissory note dated 25th May 1923 executed by him.

    2. It further recites that:

    C. Jagannatham Pillai shall deposit the title-deeds set out in the schedule to the agreement to create thereby an equitable mortgage to secure the repayment of the amount and interest covered by the promissory note.

    3. These, I think, are the only words which it is necessary in this document to refer to. It is an agreement to deposit the title-deeds to secure the repayment of a sum owing on the promissory note. On the next day namely on the 27th May the defendant wrote the following letter to the plaintiff:

    I have the honour of herewith sending you with the intention of delivering and depositing the same with you as per the memorandum dated the 26th May 1923 executed by me in your favour the title-deeds and papers relating to the property.

    4. It is common ground that this letter was accompanied by the title-deeds ' There was a clear contract on the 26th May to deposit the title deeds by way of security for the repayment of the money advanced or money, owing and on the 27th May the actual deposit of title deeds in accordance with the memorandum of agreement was made. I think it is very important that the memorandum of agreement a day before was set out in the letter which accompanied the title-deeds. On behalf of the defendant, it is contended that this claim is not maintainable because neither the memorandum of agreement nor the letter on 27th May can be given in evidence as neither have been registered.

    5. It is argued that both the documents must be taken together as forming the contract between the parties, that you cannot take either the document of 26th May or the document of 27th May by itself but that you have got to take the two together and the two together, it is argued, are the contract between the parties. The whole question is whether the documents have got to be . taken together. In my view they have. The first agreement was an agreement to deposit and the second was the actual deposit in accordance with the terms of the agreement. In my view both have to be taken together. The next thing that has got to be considered is what the effect of them is when they are taken together. If taken together, if the contract is a contract which purports to create a charge upon immovable property, then clearly under Section 17, (1) Clause (b) of the Registration Act it is a document which requires registration. Admittedly in this case there has been no registration. The contract between the parties has been reduced to writing and therefore under the Evidence Act the contract being in writing the question arises whether or not the contract has got to be registered.

    6. I have been referred to Velauakauya Krishnayya v. Ponnuswami Ayyar A.I.R. 1924 Mad. 547 by the plaintiff and that, it is argued, is a decision against this view. But in that case all that the Court held was that the document in question being a document subsequent to that which created a charge was merely a document which recorded the charge and the learned Chief Justice in that case emphasized very strongly the fact that it was in the past tense. That is not this case. This case is an agreement to create something and in this case the memorandum of agreement is an agreement to create something followed by a latter which actually carries it out. This case, in my view is .concluded by the decision of the privy Council reported in Subramaniam v. Lutchman A.I.R. 1923 P.C. 50. It is true that there is a distinction, between the words appearing in the document in that case and the words in this but in my view the distinction is so slight as to be immaterial. The document under consideration in that case read as follows:

    We hand yon herein title-deeds relating to 5th class Lot Nos.--then the property is described--also his promissory note for Rs. 63.000 due by us. This please hold as security against advances made to us.

    7. The only difference is that in the document of 26th May the agreement is to deposit the title-deeds by way of equitable mortgage to secure the repayment, whereas in the Calcutta case, title-deeds were handed over to be held as security against advances. I cannot myself see any distinction between the two. These words in, the judgment of the Privy Council were quite sufficient to create a charge upon immovable property and in my yiew following that decision the words in this case, taking these two documents together are words which did create a charge upon immovable property and therefore the documents, memorandum of agreement of 26th May and letter of 27th May taken together, require registration and without registration cannot be received in evidence. I was referred to a decision in Muthiah Chetty v. Kothandaramaswami Chetty [1916] 31 M.L.J. 347 but that seems to me to be somewhat in conflict with the Calcutta decision and as this decision was a decision prior to the decision in the Calcutta case and moreover as the Calcutta case is a decision of the Privy Council I am bound by that, I need not follow this decision.

    8. The plaint has now been amended and asks for a personal decree against the defendant for the sum of Rs. 71,837-5-6 due on the promissory note set out in paragraph 4 of the plaint. The defence raised to this by the defendant in his further written statement in answer to the amended plaint and really the one ' which I need consider is that the plaintiff cannot sue on the promissory note because the promissory note is in the name of A.R.A.B.S.M. Somasundaram Chettiar and has not been endorsed to the plaintiff. One argument put forward is this : that this is a negotiable instrument; and under the Negotiable Instruments Act it cannot be sued upon except -by the person to whom it has been endorsed over or in certain instances by the legal representatives of the plaintiff ; and furthermore that a succession certificate will in any case be necessary before it can be sued upon by the plaintiff. It is quite clear from the plaint put in in C.S. No. 358/ 24 in which the present defendent was the plaintiff and the present plaintiff was the defendant from paragraphs 2 and 3 of that, that this was a joint Hindu family and Somasundaram Chettiar was the managing member of it and was carrying on the joint family business and in the course of carrying on that family business the moneys claimed in the suit were advanced. It is now said that there is no evidence that this was a joint family. It is perfectly clear from the plaint which has been marked and put in as an exhibit in this case that even, according to the defendant's own case when he was the plaintiff in that suit, his was a joint Hindu family being carried on by Somasundaram Chettiar as managing member of it and this was a debt incurred in respect of the joint family business. What is the position then ?

    9. The question is whether without anything more, without any endorsement, the managing member of the family having died, the surviving members of the family can sue upon a negotiable instrument without anything further, without an endorsement and without a succession certificate. I think that the case in Vyravan Ghettiar v. Sreenivasa Chariar A.I.R. 1921 Mad. 68 is a case very much in point. That case held that no succession certificate was required where a suit is brought on a document by the surviving members of the joint Hindu family unless it is in respect of separately acquired property. I think that shows quite clearly that where it is not separately acquired property no such succession certificate is required and obviously applies to the case where there has been no endorsement of the document. Two cases are quoted in 28 M.L.J.: Kuttia Pillai v. Ranganadham [1915] 28 M.L.J. 323 and Ramanatham Chetti v. Subramanyam Chetti [1915] 28 M.L.J 372. I think it is quite clear on the authority of these cases that the plaintiff in this suit being a surviving member of a joint Hindu family can sue and take the benefit of the promissory note given to the managing member in respect of moneys advanced by the managing member out of the joint family funds.

    10. The other point taken in the written statement is that the defendant is at any rate entitled to take credit for the three promissory notes amounting in all to Rs. 17,700 which were executed in his favour and endorsed by him to the plaintiff in this suit. But it is clear from the document executed by him at the time when he so endorsed over the promissory notes that the plaintiff was given full liberty to deal with the promissory notes as he desired. He was entitled not to bring a suit at all upon it or if he brought a suit or claimed the amount he could claim an amount less than that set out in the promissory note and only if any sum was collected, on the promissory note or on those promissory notes, would such a sum be applied pro tanto in diminution of any claim the plaintiff might have against the defendant. The promissory notes are admittedly valueless, and upon the plaintiff getting a decree in this suit will be handed back to the defendant.

    11.There will be a decree for the plaintiff for Rs. 86,293-10-8 with costs and interest at 6% from this date till date of realization.

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    Comments

    A.R.A.R.S.M. Arunachallam Chetty v. C. Jagannatha Pillai
    (Aug 18, 1926)