Following the ruling in Muthia Chetty v. Kothandaramaswami Chetty(2) on the point, we agree with the lower Appellate Court that evidence was admissible to prove the terms of the mortgage by deposit of title-deeds aliunde, in spite of the subsequent so-called simple mortgage, and that section 91 of the Evidence Act is no bar to the reception of the evidence. It is contended, however, that the assignment to the plaintiff did not vest the mortgage, as there was no registered instrument. It is suggested that the transfer was a sale within section 54 of the Transfer of Property Act. We do not think that is clear. It may be that the transfer was for collection only, in which case, Cunniah v. Gopala Chettiar(3) would have to be considered. We musk therefore call for a finding on this point. Fresh evidence is allowed. Two months are allowed for submission of findings and ten days for objections.
[In compliance with this order the Subordinate Judge of Chingleput submitted a finding that the endorsement was not for collection but was for value. Their Lordships then delivered the following JUDGMENT:]
Krishnan, J.:— The first question that arises for our decision in this Second Appeal is whether an endorsee for value of a negotiable instrument, the amount of which had been secured by a mortgage by deposit of title-deeds, can claim to enforce the mortgage in the absence of a registered instrument conveying the mortgage rights to him.
A somewhat similar question arose before the learned Chief Justice and my learned brother with reference to an endorsee for collection in Cunniah v. Gopala Chettiar, and was answered in the endorsee's favour. That decision/however, is not conclusive in this case, as here we have an endorsee for value and the judgment, of my learned brother in that case was based entirely on the fact that the endorsement was for collection; and though the learned Chief Justice makes no such distinction, my learned brother did not apparently agree with his Lordship's views. Sitting with Hughes, J., the learned Chief Justice has again stated his view in Perumal Ammal v. Perumal Naicker, that though the rule is now that a mortgage right or debt cannot be transferred without a registered instrument under section 54 of the Transfer of Property Act it is subject to the exception, that
“where the law still admits of the separate transfer of the mortgage debt, as by the endorsement of a promissory-note secured by a deposit of title-deeds or by the attachment and sale in execution of a mortgage debt, section 8 of the Transfer of Property Act still operates to carry the security with, it.”
We are, of course, not concerned with court sales of mortgage debts or their effect in this case; that will be governed by the special provisions of the Code of Civil Procedure. The observation regarding promissory notes is clearly an obiter dictum, if I may say so with respect; and though the opinion of the learned Chief Justice is entitled to great weight, there is no decision binding on us and we must, therefore, consider the question raised before us on its merits.
It seems to me quite clear that a mortgage of immoveable property is itself immoveable property under the Transfer of Property Act, whatever the form of the mortgage may be; and transfer of ownership of such a right falls under section 54 and will require a registered instrument for the purpose: vide Sahhiuddin Saha v. Sonaullah Sarkar and Perumal Ammal v. Perumal Naicker. It is true that the Chief Justice sitting on the Original side as Wallis, J. (as he then was) held, relying on section 8 of the Act, that the transfer of a mortgage was the transfer of the debt with its attendant securities and that registration was, therefore, unnecessary for the transfer of the mortgage, vide Dwarka Doss v. Danakoti Ammal. There was some conflict of opinion on the point: see Subramanian v. Perumal Reddi(4) on one side, and the opinion of Bashyam Ayyangar, J., in Ramasami Pattar…(Defendant No. 2) v. Chinnan Asari…(Plaintiff) .*(5) and the decision of Chamier, J. (as he then was) in Mutsaddi Lal v. Muhammad Hanif(6) following it, on the other side. In this conflict of view the Legislature amended the Act in 1900 and excluded a mortgage debt from the category of actionable claims. The object was plainly to remove mortgage debts from the scope of section 8, which speaks of “debt or other actionable claim” and to make it necessary to have a registered instrument for its transfer. It was on the application of section 8 that it was held that the transfer of a mortgage did not require registration, and with the non-applicability of the section resulting from the amendment one would have thought that all doubts regarding the necessity of having a registered instrument for the transfer of a mortgage right in all cases would have been removed. But the learned Chief Justice thinks, as stated above, that though the rule is now clear with reference to mortgage debts in general, there is still an exception in favour of mortgages by deposit of title-deeds where promissory notes have also been taken for the mortgage amounts. With every respect for his Lordship's opinion I find it difficult to follow it. It is clear from his judgment in the case that he would have held that a registered instrument would be necessary to convey the mortgage rights even in a case of a mortgage by deposit of title-deeds if no negotiable instrument had been taken for the mortgage amounts. Does the taking of the negotiable instrument make any difference on the point? I think not, as the mortgage debt is none the less a mortgage debt because it happens to be also a promissory note debt. If it is a mortgage debt, section 8 cannot apply to it and the whole argument based on the section fails.
The fact that the promissory note can be transferred by endorsement, it seems to me, does not make any real difference to the question before us. When the note amount is so transferred, it seems to me, it is not transferred as a secured debt at all. The Negotiable Instruments Act makes no provision with reference to securities. In my view, it is only if a mortgage debt is transferred as a secured debt that it will carry the securities with it, on the principle embodied in section 8, and not otherwise. Even in the case of a mortgage where there is no promissory note it cannot, I think, be said that the law does not allow the mortgagee to transfer the debt as an unsecured or simple debt without a registered instrument if he thinks fit to do so. The security is for his benefit and he can give it up if he likes; and the transferee will then get the right to the debt but not to the security. Thus, as regards transferability in law as an unsecured debt, a mortgage debt for which a negotiable instrument has been taken does not seem to me to differ fundamentally from one where none such has been taken. In my view, in either case, if the debt is transferred by endorsement or otherwise, without the transferor taking care to transfer the mortgage right by registered instrument, the debt and the security will get dissociated and the security may possibly cease.
If we are to hold that the security passes by the endorsement of the promissory notes in cases of mortgages by deposit of title-deeds where notes have been taken for the mortgage amounts, we must hold the same view with reference to any kind of mortgage where the mortgagee-happens to have taken a promissory note for the mortgage amount; for the argument will be just the same. We will also have to hold that not only the first endorsee but every subsequent endorsee including even blank endorsees will obtain the mortgage rights by endorsement unless, of course, a different intention is manifest. This view, I think, will introduce a grave uncertainty into the registration of mortgages and render the records of the registration office unreliable in ascertaining in whom the mortgage right subsists for the time being. Such a view, therefore, does not commend itself to me. If I am right in thinking that section 8 does not apply to mortgage debts, there is no scope for the application of the maxim generalia specialibus non derogant. But if it did apply, I am inclined to think it would make section 54 of the Act override section 8 rather than the other way; for section 8 refers to all kinds of securities, whereas section 54 so far as it is relevant, refers only to a limited class of securities, viz., mortgage securities: see Mutsaddi Lal v. Muhammad Hanif above quoted.
No valid argument can be based on the alleged anomaly of holding that the transfer of a mortgage by deposit of title-deeds requires registration when the creation of it does not; for that seems clearly to be the law, at any rate where there is no promissory note involved.
After careful consideration I have come to the conclusion, though not without hesitation on account of the opinion of the learned Chief Justice to the contrary, that the endorsee of a negotiable instrument does not get any right to the mortgage by deposit of title-deeds in his endorser's favour by the mere endorsement of the note, without a registered transfer of the mortgage rights.
On this view it is argued that the District Munsif had no jurisdiction to try the suit, as his jurisdiction was based solely on the fact that some of the lands mortgaged were within his jurisdiction. It is contended that on the finding that the mortgage rights did not pass to, the plaintiff the Court lost jurisdiction. That is not so; jurisdiction has to be judged, on the averments in the plaint, unless indeed an averment has been fraudulently made for the express purpose of giving jurisdiction. There is no such allegation here. Jurisdiction does not depend upon the relief the Court finds itself able to give after trial. The jurisdiction of the Court in this case is, therefore, not affected by the view I am taking; but the decree so far as it gives relief against the property mortgaged must be set aside.
There will be a personal decree only against defendants 1 and 2 for the amount found due and interest at 6 per cent from date of suit to date of payment. The rest of the suit is dismissed. The order as to costs in the first Court will stand, but the parties will bear costs in this and the Lower Appellate Court.
Napier, J.:— I agree. I had already prior to the hearing of the case before the Learned Chief Justice expressed my opinion in an unreported case I saw no reason to alter it during the argument in that case nor do I now.
N.R