Perumal Ammal v. Perumal Naicker

1. This case raised questions of some importance under the Transfer of Property Act as to the transfer of mortgages and of actionable claims by way of gift, and we have taken time to consider our judgment.

2. The facts may be very briefly stated. A few days before his death one Pothi Naicker executed Exhibit-50, an unregistered instrument by which he made an immediate disposition of property consisting of mortgages, promissory notes, and book-debts allotting the items in Schedule I to the defendants, the sons of a deceased son, and the items in Schedule 2 to the plaintiff, the daughter and only surviving child of another deceased son. It is not disputed that this disposition in the deed was intended to take effect at once. Exhibit 50 recites this, and is borne out by the oral evidence of the plaintiff's mother, the 1st witness for the defence in Original Suit No. 26 of 1917 which was tried along with the present suit, that the promissory notes and mortgage deeds mentioned in the second schedule were delivered to her on the plaintiff's behalf when Exhibit 50 was executed. The outstandings or "balances under account" are assigned by the terms of Exhibit So but it does not appear that anything" was handed over to the plaintiff's mother in respect of such outstandings.

3. Section 123 of the Transfer of Property Act requires gifts of immoveable property to be made by registered instrument and the first question is whether the gifts of the mortgages are to be regarded as gifts of immoveable or of moveable property. Under the Act as originally passed mortgage debts were held to be actionable claims, and on this view the effect of Section 8 was that on the transfer of the mortagee debt the securities passed with it. That this was the intention of the legislature in my opinion admits of no doubt, first because, the language of the section is wide enough to cover such securities and it is inconceivable that it would have used such general language if it had not intended to include landed securities the most important class of all; secondly, because Section 8 occurs in Chapter II which deals with the general rules applicable to all classes of property, and is in the first part of that chapter which is headed " A transfer of Property whether moveable or immoveable "; and thirdly, because the section reproduces the rule of English Law that even as regards mortgages the security passed with the principal debt. In Martin v. Mowlin (1760) 2 Burr 979 Lord Mansfield expressed himself as though the legal estate in the land passed to the transferee of the mortgage debt, but in Duffield v. Elwes (1827) 1 Blgh N.S. 497, 541 Lord Eldon pointed out that this language was not strictly accurate and that what happened was that equity treated the mortgagee making the transfer as a trustee of the land for the transferee of the mortgage debt. The Indian Legislature would seem to have decided to enact the rule in India in the form in which it was expressed by Lord Mansfield. Under the Act as originally passed mortgage debts were assignable as actionable claims, and the assignment of the debt in my opinion passed the security with it under Section 8. This was the view taken by this Court in Subramaniam v. Perumal Reddi (1895) I.L.R. 18 Mad. 454 : 5 M.L.J. 92 and I think it was right.

4. The. Legislature however subsequently became dissatisfied with the state of the law, and in 1900 amended the act by substituting a new chapter as to actionable claims, and inserting in Section 3 a definition of " actionable claim" which excluded any " debt secured by mortgage of moveable property." The effect of this amendment was that mortgage debts could no longer be transferred as actionable claims under Chapter VIII. The mortgagee's interest in the land had all along been transferable as immoveable property by way of sale exchange and gift under chapters IV," VI and VII and had carried with it the mortgage debt, and I think that the intention of the legislature in removing mortgage debts from the category of actionable claims which are transferable under Chapter VIII must have been that in general mortgage debts would only be transferred in this way under chapters IV, VI and VII with the mortgagee's interest in the land, and therefore by registered instrument, more especially as the alternative view that the legislature intended to permit of oral transfers of mortgage debts appears to be altogether inadmissible as opposed to the general policy of the Act.

5. In his observations in Ramaswami Pattar v. Chinnan Pattar (1991) I.L.R. 24 Mad. 449 Sir Bhashyam Aiyangar would appear to have been of opinion that this was so even before the amendments of 1900. With that view for the reasons already given I am unable to concur, but I agree that it is the result which follows from the amendments introduced in 1900, subject only to this, that where the law still admits of the separate transfer, of the mortgage debt, as by the indorsement of a promissory note secured by a deposit of title deeds, or by the attachment and sale in execution of a mortgage debt under the Civil Procedure Code, S. S still operates to carry the security with it, as held by this court in Cunniah v. Gopal Chettar (1918) 26 M.L.T. 242, and in Natarajah Aiyar v. The South Indian Bank of Tinnevelly (1911) I.L.R. 37 Mad. 51.

6. We are now dealing with a transfer not by way of sale but by gift. If however, according to the scheme of the Act as amended, mortgages ordinarily can be transferred by way of sale only as immoveable property, it follows in my opinion that they can only be transferred by way of gift under Section 123 as immoveable property and consequently only by a registered instrument. The gifts of the mortgages under Exhibit 50 therefore fail. The fact that some of them were for less than Rs. 100 makes no difference, as Section 123 contains no exception in favour of gifts of small value.

7. We have next to deal with the gift of book debts which was a gift of actionable claims as now defined in Section 3 of the Transfer of Property Act; and the first question which arises is, are such gifts governed by Chapter VII of the Act, which deals with gifts of moveable as well as immoveable property, or by Chapter VIII, which deals separately with the transfer of actionable claims in terms which are wide enough to cover transfers with or without consideration. In my opinion the proper conclusion on the construction of the Act is that they are governed by Chapter VIII. In the first place Section 130 of that chapter provides

" that the transfer of an actionable claim shall be effected only by the execution of an instrument in writing signed by the transferor or his authorised agent and shall be complete and effectual upon the execution of such instrument."

This is sufficient to show that an actionable claim is not moveable property which can be transferred by way of gift by mere delivery under Section 123. Further a mere actionable claim is incapable of transfer, and the provision in section 123 that delivery may be made in the same way as goods sold are delivered shows that what are dealt with in Section 123 are gifts of tangible moveable property such as goods or as a horse or a book. This conclusion is, also, in my opinion, in accordance with the principles of English Law on which the Tranfer of Property Act is based. In order that, a gift Inter vivos should be enforced it was necessary that the donee's title should be complete, as equity would not help a volunteer in such a case. A less stringent rule was applied in the case of donationes martis causa or gifts in contemplation of death which are excepted from Chapter VII by Section 129. Now, as pointed out in the very learned judgment of Fry and Bowen Lords Justices, in Cochrane v. Moore (1890) 25 Q.B.D. 57 where the history of the law on this subject is traced from the earliest times, at common law in the absence of a deed delivery was necessary to pass title to chattels. Title passed either by deed or by delivery, and this is the foundation of the rule in section 123 under which as regards gifts of moveables title passes either by registered instrument, which is the Indian equivalent of the English deed, or by delivery. As regards the gift of chooses in action there was a difficulty because, on the one hand, the common law did not admit of the assignment of a chose in action and equity would not assist a volunteer, and on the other hand, they were not capable of delivery in the ordinary sense. Section 25, (6) of the Judicature Act, however, made choses in action assignable and gave the assignee a complete title, and it has been recently held by Sargent, J. in re Westerten (1919) 2. Ch. Dn. 104 that the effect of that section is to improve the position of a done or assignee without consideration of a chose in action and to enable him to sue on the assignment because it makes the assignee's title complete, as our own Section 130 does in terms. It is true that in the case just cited there was also delivery of the indicia of title, but the learned judge's decision appears to be based entirely upon the assignment. In my opinion, both in India and in England, an assignment in the statutory form passes title to actionable claims even where the assignment is without consideration. Exhibit 50 is therefore a sufficient assignment of the book-debts under Section 130 of the Transfer of Property Act. The prevailing view in this Court is that negotiable instruments are actionable claims assignable under this section as well as by endorsement, and it follows that the promissory notes also in this case were sufficiently assigned by Exhibit 50.

8. The last question is as to whether the failure of the gift of the mortgages was a sufficient ground for dismissing the suit as regards the book-debts and outstandings also as the Subordinate Judge appears to have thought.

9. A somewhat similar question arose in Pothi Naicken v. K. Naganna Naicker (1915) 30 M.L.J. 62 where it was held that a partition deed which failed as to immoveables for want of registration could not be given effect to as to moveables. I think that decision was quite right, but this question has recently been very fully considered by the Court of Appeal in Godman v. Godman (1920) P. 261 a case much more like the present, in which a soldier's codicil to his will, which would have been good as to personalty only also included realty which it was incompetent to pass; and I think that in deciding the present case we should be guided by the principles laid down in that case though they may not always be very easy of application and the learned Lords Justices differed as to their application in that particular case. What is clearly laid down by all the judges in that case is that the failure of the disposition as to realty will not in every case have the effect of making it fail as to personalty as well. The argument that it was impossible to say what the testator would have done if he had known that his will must fail as to realty was not accepted as a sufficient ground for invalidating it in toto. Warrington, L.J. at p. 277 treats it largely as a question whether to allow the will to operate as to personality would defeat the testator's intention and Scrutton, L.J., with whose statement of the principles applicable Lord Sterndale M. R. concurred, appears to regard it as a question whether the bequest of personalty can be treated as conditional on the devises of realty being valid. He observes at p. 284.

If a testator informally expressed his views as to the disposition of his land and those views were frustrated by the statutes of Mortmain or the doctrine of perpetuities it would not seem to be a ground for interfering with his bequests of personality unless the laiter were conditional on the validity of the disposition as to land.

Applying this test to the present case there seems to be no reason for holding that Exhibit 50 fails as to the book debts and promissory notes. The object of the donor, who was within a few days of his death, was to prevent the defendants who are the sons of a deceased son, from taking the whole of his property on his death as his natural heirs, and to give a share of it to the plaintiff, who is the daughter of another deceased sou. In these circumstances he cannot be held to have intended that her getting the moveables alloted to her should be conditional on her also getting the immoveables alloted to her. There is therefore no sufficient reason for refusing to give effect to the gift as to moveables, and the appeal must be allowed as to the book-debts and promissory notes and dismissed as to the mortgages. The decree will accordingly be varied by giving the plaintiff the book debts and promissory notes allotted to her in the second schedule to Ex. 50. Parties to pay and receive proportionate costs throughout.

Huges, J.

10. I agree.