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Smart Summary

Judicial Opinion Summary

Factual and Procedural Background

This Full Bench opinion concerns the legal character of a Lahan Gahan mortgage — a mortgage in which the remedy expressly provided is foreclosure in default of payment by a given date and in which the only remedy expressly given is foreclosure — and whether such a mortgage gives rise, by implication, to a covenant of personal liability on the mortgagor. The Full Bench was asked to answer a reference framed because of the decision in Gopikisan v. Mt. Mankuarbai, which had applied Ram Narayan Singh v. Adhindra Nath Mukherji as interpreted in Jiwandas v. Mt. Janki and in doing so was taken to have overruled Govind v. Jagannath. The Full Bench heard argument and issued an opinion answering the reference in the affirmative that in a Lahan Gahan mortgage no personal covenant of liability is implied if none is included in the deed. The court also considered and decided a substantive claim in the underlying suit: plaintiffs' alternative claim for a personal decree against the defendant on the basis of alleged misrepresentation as to the value of the mortgaged property.

Legal Issues Presented

  1. Whether, in a Lahan Gahan mortgage (a mortgage providing foreclosure as the sole remedy in default), there is by necessary implication no covenant of personal liability if no such covenant is contained in the deed.
  2. Whether plaintiffs are entitled to a decree for sale combined with a personal decree against the defendant (if sale proceeds are insufficient) on the ground that the defendant misrepresented the value of the mortgaged property at the time of execution of the mortgage deed.

Arguments of the Parties

Arguments Advanced Before the Court

  • It was argued before the Bench that a mortgage-deed is an acknowledgment of debt and that such an acknowledgment implies a personal promise to pay the debt; thus, a personal covenant should be implied in the mortgage-deed (this argument underpins the law as stated in Gopikisan v. Mt. Mankuarbai).
  • It was further argued that the nature and the terms of a mortgage-deed are the same thing (i.e., that reference to the terms alone is sufficient to determine whether a personal covenant is implied), a position the court addressed critically.
  • With respect to the misrepresentation claim, plaintiffs relied on an asserted statement by the defendant as to the value of the mortgaged property (allegedly about Rs. 9,000) and claimed entitlement to a personal decree if sale proceeds were insufficient; the court considered whether plaintiffs' consent was in fact induced by any such misrepresentation.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Gopikisan v. Mt. Mankuarbai Cited as holding that the Privy Council decision in Ram Narayan Singh v. Adhindra Nath Mukherji must be considered to have overruled Govind v. Jagannath and that in a mortgage where foreclosure is the remedy the mere fixation of a date does not amount to a stipulation binding the mortgagor to repay within the meaning of Section 68 of the Transfer of Property Act. The Full Bench held that Gopikisan was inaccurately decided and misapplied earlier authorities by not giving due weight to the nature of the remedy (foreclosure) in implying absence of personal covenant; the Bench declined to follow Gopikisan's interpretation.
Ram Narayan Singh v. Adhindra Nath Mukherji Quoted for the passage that (i) a loan prima facie involves personal liability, (ii) such liability is not displaced merely because security is given, but (iii) the nature and terms of the security may negative any personal liability. The court examined this passage and concluded it did not overrule earlier authorities (such as Govind v. Jagannath) nor require that a personal covenant be implied in every mortgage; rather, the court read the passage as recognizing that the nature of the deed may negate personal liability.
Jiwandas v. Mt. Janki Interpreted Ram Narayan Singh to mean that a personal covenant exists in every mortgage unless expressly negated or negated by necessary implication; used in Gopikisan. The Full Bench considered the learned Judge’s interpretation in Jiwandas to have referred only to the terms of the deed and not sufficiently to the nature of the deed; the Bench agreed the nature of the deed (remedies provided) must be considered and that Jiwandas' statement, read in full context, also recognized that some mortgages (foreclosure and many usufructuary) give rise to an implication of no personal covenant.
Govind v. Jagannath Held that in a mortgage-deed where foreclosure is the remedy, the mere fixation of a date by which the mortgagor undertakes to pay does not amount to a stipulation binding him to repay within Section 68 of the Transfer of Property Act. The Full Bench held that Govind v. Jagannath had not been overruled by Ram Narayan Singh and reaffirmed its principle that certain mortgages (including Lahan Gahan) imply the absence of a personal covenant.
Jag Sahu v. Mussammant Ram Sakhi Kuer Authority that insertion of a covenant in a usufructuary mortgage to repay on a particular date may entitle the mortgagee to a personal decree against the mortgagor. The court used this decision to distinguish between different types of mortgages: while such a covenant may have effect in a usufructuary mortgage, the same consequence does not necessarily follow in mortgages by conditional sale or similar forms (such as Lahan Gahan).
Dattambhat Rambhat v. Krishnabhat Similarly cited to show that a covenant to repay in a usufructuary mortgage can entitle the mortgagee to a personal decree. Used with the preceding case to support the proposition that the nature of the mortgage matters and that results in usufructuary mortgages do not automatically carry over to conditional-sale-type mortgages like Lahan Gahan.
Balkishen Das v. W.F. Legge Privy Council recognition that mortgages similar to Lahan Gahan (e.g., "kutkubala" or "bai-bil-wafa") stand on the same footing as mortgages by conditional sale and that it is not necessary in such mortgages for the mortgagor to make himself personally liable for repayment. The Full Bench relied on this authority to support the view that Lahan Gahan mortgages are on the same footing as mortgages by conditional sale and need not imply personal liability.
Kalka Singh v. Paras Ram Privy Council decision noting that while an unqualified admission of debt may imply a promise to pay, that implication is not necessarily present where there is an express promise to pay in a particular manner. The court cited this to reinforce that express terms prescribing a particular mode of satisfaction (e.g., foreclosure) can preclude an implication of personal liability.
Narotam Das v. Sheo Pragash Singh Privy Council held there was no personal covenant to pay where instrument promised repayment within a fixed period and provided that in default the debt would be satisfied out of the property hypothecated. The Full Bench treated this as aligning with Govind v. Jagannath, showing that in some mortgages the nature of the instrument implies no personal covenant; it supported the Bench's conclusion for Lahan Gahan mortgages.
Jatindra Nath Basu v. Peyer Deye Debi Privy Council language used to repel an inference of personal liability from the mere mention that a certain sum had been advanced; their Lordships inferred the Maharaja did not intend personal liability. The Bench cited this passage to show that documents mentioning advances do not necessarily create an inference of personal liability and to counter the argument that Ram Narayan Singh mandates such an inference in all cases.

Court's Reasoning and Analysis

The court's analysis proceeds from the central premise that the implication (or absence) of a personal covenant in a mortgage-deed depends on both the terms and the nature of the deed — with special emphasis on the remedy provided for in the deed. The Full Bench reviewed a line of authorities (both Privy Council and Indian decisions) and extracted these controlling propositions from the text:

  1. Past decisions (including Privy Council authorities) establish that a personal covenant is not necessarily implied in every mortgage; the nature of the mortgage can negative personal liability.
  2. Although some decisions (as interpreted in Jiwandas) state that in every mortgage bond there is a personal covenant unless the contrary is expressly stated or appears by necessary implication, that statement must be read with attention to the nature of the mortgage; the learned Judge in Jiwandas did acknowledge that certain mortgages (foreclosure and many usufructuary mortgages) give rise to an implication that there is no personal covenant.
  3. The Bench examined Ram Narayan Singh and concluded that its passages, properly read, do not compel a contrary outcome; the Privy Council in other contemporaneous decisions (e.g., Jatindra Nath Basu) drew inferences that supported the absence of personal liability where the nature and terms indicated this result.
  4. Statutory context: Section 68 of the Transfer of Property Act confines the mortgagee's right to sue the mortgagor in person to specified cases, the first being where the mortgagor binds himself to repay; Section 58 definitions show that not all mortgage types involve such a binding personal promise (e.g., mortgages by conditional sale and usufructuary mortgages do not bind the mortgagor in that way).
  5. Applying these legal principles to a Lahan Gahan mortgage — which, although not falling within Section 58(c)'s definition of mortgage by conditional sale, stands on the same footing as such mortgages (as recognized in Balkishen Das) — the court concluded that the provision of foreclosure as the exclusive remedy implies that the parties did not intend a personal covenant unless one is expressly included.
  6. Thus, the Bench found Gopikisan to have misapplied the principles by failing to consider that a foreclosure-only remedy may imply the absence of a personal covenant, and therefore declined to follow Gopikisan's broader interpretation.
  7. On the separate question of alleged misrepresentation as to value, the court applied Section 19 of the Indian Contract Act: the remedies available to a party who entered a contract under fraud or misrepresentation are to avoid the contract or to insist on performance (not to insist on a different contract). The right to such remedies exists only if the consent was in fact caused by the fraud or misrepresentation. The court found it impossible to believe plaintiffs relied solely on the defendant's alleged statement as to value and concluded that any such statement did not entitle plaintiffs to the personal decree they sought.

Holding and Implications

Holding: The Full Bench answered the reference in the affirmative. In accordance with the opinion given by the Full Bench, the court held:

There is no personal covenant of liability in a Lahan Gahan mortgage-deed where no such covenant is included in the terms of the deed.

Implications:

  • Direct effect in the underlying litigation: The mortgage-deed on which the suit arose contains no personal covenant; accordingly, the plaintiffs were not entitled to a personal decree against the defendant based on the mortgage-deed alone.
  • On the plaintiffs' alternative claim of a personal decree predicated on alleged misrepresentation of value, the court held plaintiffs were not entitled to the decree: Section 19 of the Contract Act limits available remedies for fraud/misrepresentation and requires that the misrepresentation have actually induced consent; the court found plaintiffs had not relied solely on the defendant's statement of value and therefore could not obtain the different relief they sought.
  • Disposition: The appeal was dismissed with costs. The court fixed pleader's fee at Rs. 150.
  • Precedential note: The Full Bench considered and reconciled earlier authorities, expressly holding that Gopikisan had been inaccurately decided and that Govind v. Jagannath had not been overruled by Ram Narayan Singh. The Bench emphasized the controlling importance of the nature of the mortgage (i.e., the remedy specified) in determining whether a personal covenant is implied.

Final Order:

Appeal dismissed. Costs awarded; pleader's fee fixed at Rs. 150.

Show full summary ...

    (Haji) Mahomed Haji Wali Mahomed v. Ramappa

    Jackson, A.J.C:— The question we have to decide is whether, in a Lahan Gahan mortgage, that is, a mortgage in which the remedy provided is foreclosure in default of payment by given date and in which the only remedy expressly given is that of foreclosure, there is by implication no covenant of personal liability. The reference has been made necessary by the decision in Gopikisan v. Mt. Mankuarbai(1) which applied Ram Narayan Singh v. Adhindra Nath Mukherji(2) as interpreted in Jiwandas v. Mt. Janki(3). According to Seth Gopikisan v. Mt. Mankuarbai the Privy Council decision in Ram Narayan Singh v. Adhindra Nath Mukherji must be considered to have overruled Govind v. Jagannath(4), in which it was laid down that

    “where in a mortgage-deed the remedy of the mortgagee is expressed to be foreclosure the mere fixation of a date by which the mortgagor undertakes to pay the mortgage-money does not amount to a stipulation binding him to repay the same within the meaning of clause (a), Section 68 of the Transfer of Property Act.”

    2. As has been held in Jag Sahu v. Mussammant Ram Sakhi Kuer*(5) and Dattambhat Rambhat v. Krishnabhat(6), the insertion in a usufructuary mortgage of a covenant by the mortgagor to repay the consideration money on a particular date may entitle the mortgagee to a personal decree against the mortgagor but it does not follow that would be the effect of inserting such a covenant in a mortgage by conditional sale or in a mortgage of a similar nature to one by conditional sale. It has been pointed out in Govind v. Jagannath that a Lahan Gahan mortgage does not come within the definition of a mortgage by conditional sale in Section 58(c) of the Transfer of Property Act. Nevertheless, the effect of a Lahan Gahan mortgage is the same as that of one by conditional sale and mortgages in forms similar to that of Lahan Gahan, such as “kutkubala” or “bai-bil-wafa,” were recognized by their Lordships of the Privy Council in Balkishen Das v. W.F Legge(7), in a passage that occurs at p. 159, as standing on the same footing as mortgages by conditional sale. In that case their Lordships said that it is not necessary in such mortgages that the mortgagor should make himself personally liable for the repayment of the loan. Again, in Kalka Singh v. Paras Ram(8), another Privy Council decision, the following occurs:

    “In the next place, although an unqualified admission of a debt no doubt implies a promise to pay it, their Lordships are not prepared to hold that is necessarily so where there is an express promise to pay in a particular manner.”

    3. These decisions are authority for the view that a personal covenant is not necessarily implied in every mortgage. In Narotam Das v. Sheo Pragash Singh(9) their Lordships have held that there was no personal covenant to pay in an instrument which contained a promise to repay the loan within a fixed period and then provided, in default of payment, for satisfaction of the debt out of the property hypothecated. This, is exactly the same view as has been taken in Govind v. Jaggannath. It goes further than the two Privy Council decisions already cited and makes it clear that in some mortgages the nature of the mortgage gives rise to the implication that there is no personal covenant. It has now to be considered whether the Privy Council have taken a different view in Ram Narayan Singh v. Adhindra Nath Mukherji. At p. 400 (of 44 Cal.) the following passage occurs:

    “In considering this question it must be borne in mind (i) that a loan prima facie involves such a personal liability; (ii) that such a liability is not displaced by the mere fact that security is given for the repayment of the loan with interest; but (iii) that the nature and terms of such security may negative any personal liability on the part of the borrower.”

    4. The interpretation of this passage in Jiwandas v. Mt. Janki, as applied in Gopikisan v. Mt. Mankuarbai, is that a personal covenant to repay the money lent exists in every mortgage transaction unless it is negatived expressly or by necessary implication by the terms of the bond or the circumstances of the case. It is argued before us that the mortgage-deed is an acknowledgment of the debt, that such acknowledgment implies a personal promise to pay the debt and that, therefore, the law is correctly laid down in Gopikisan v. Mt. Mankuarbai. It is difficult, however, to hold that their Lordships of the Privy Council have, in Ram Narayan Singh v. Adhindra Nath Mukherji, taken a different view to those expressed in the earlier decisions already referred to. Another judgment of their Lordships delivered in the same year as Ram Narayan Singh v. Adhihdra Nath Mukherji is that in Jatindra Nath Basu v. Peyer Deye Debi(10). At p. 255 (of 31 M.L.J) they seem to repel the argument now sought to be based on Ram Narayan Singh v. Adhindra Nath Muhherji by the following words:

    “The Subordinate Judge and the High Court have assumed from the mention in that document that the Rs. 1,30,030 had been advanced that it might be inferred that it was the intention of the parties that the Maharaja Ram Narayan Singh should be personally liable to repay the advance. Their Lordships do not draw that inference from that document. On the contrary, their Lordships draw the inference from that document that the Maharaja Ram Narayan Singh did not intend that he should be personally liable.”

    5. Prom the words used in Ram Narayan Singh v. Adhindra Nath Muhherji I do not think that their Lordships' pronouncement in that case supports the argument taken before us. In my order of reference I have pointed out that the learned Judge, who interpreted their Lordships' pronouncement in Jiwandas v. Mt. Janki, interpreted it, in my opinion, somewhat inaccurately, because he referred only to the terms of the deed and not to the nature thereof. It is argued before us that the nature and the terms of a mortgage-deed are the same thing, but I cannot agree. It is true that the nature of the deed must be set forth in the terms and it is set forth, in my opinion, in the terms which state how the property is to be used in satisfaction of the debt. It is also argued before us that the nature of a mortgage deed has nothing to do with the remedy but it seems to me clear that it is the remedy which decides whether a mortgage is by nature a simple mortgage, or a mortgage by conditional sale or a usufructuary mortgage and so on. This is indeed clear from the words used by their Lordships of the Privy Council in Ram Narayan Singh v. Adhindra Nath Muhherji at p. 401 (of 44 Cal.):

    “having regard to the nature of the deed of 14th April 1896, which was a usufructuary mortgage only.”

    6. It seems to me that the nature of the deed, that is, the terms relating to the remedy, has been given special importance by their Lordships and that the nature of the deed may by itself negative a personal covenant. That is also I think in accordance with Section 68 of the Transfer of Property Act. That section gives the mortgagee a right to sue the mortgagor for the mortgage money in three cases only the first of which is where the mortgagor binds himself to repay the mortgage money. Reference to S. 58 will show that it is in only two of the four mortgages there defined that the mortgagor binds himself to pay the mortgage money; he does not do so in a mortgage by conditional sale or in a usufructuary mortgage and as I have said, a mortgage such as that we are considering, stands on the same footing as a mortgage by conditional sale.

    7. Although I have expressed the opinion that the learned Judge who interpreted Ram Narayan Singh v. Adhindra Nath Muhherji in Jiwandas v. Mt. Janhi has restated their Lordships' pronouncement somewhat inaccurately, it is clear from what he goes on to say that he was in no danger in that case of applying that pronouncement wrongly. After his statement:

    “In every mortgage bond there is a personal covenant to pay the mortgage debt unless the contrary is expressly stated or appears by necessary implication from the terms of the bond,”

    the following sentence occurs: “Where there is no express covenant, that necessary implication” that is, that there is no personal covenant:

    “arises out of the terms of most foreclosure and many usufructary mortgages, but not out of those of a simple mortgage for sale.”

    8. By these words he gives the requisite value to the nature of the mortgage. In Gopikisan v. Mt. Mankuarbai he seems to have misapplied his own judgment and to have omitted to consider that the provision of foreclosure and no other remedy in a deed might imply the absence of a personal covenant.

    9. I am of opinion that Seth Gopikisan v. Mt. Mankuarbai has been inaccurately decided and that Govind v. Jaagnnath has not been overruled by Ram Narayan Singh v. Adhindra Nath Mukherji I consider that in a Lahan Gahan mortgage it is necessarily implied that there is no covenant of personal liability if no such covenant is included in the terms of the deed; and that the question referred to us should be answered in the affirmative.

    Macnair, O.C.J:— I agree.

    Subhedar, A.C.J:— I also agree. After receiving the opinion of the Full Bench, Jackson, A.J.C delivered the following:

    JUDGMENT

    10. In accordance with the opinion given by the Full Bench I hold that there is no personal covenant in the mortgage-deed on which the suit out of which this appeal arises is based. There is one other point to be considered and that is the claim of the plaintiffs to a decree for sale with a personal decree against the defendant, in the event of the sale proceeds being insufficient to satisfy the mortgage debt, on the ground that the defendant misrepresented to the plaintiffs the value of the property mortgaged at the time the mortgage deed was executed. Both the lower Courts have recorded that the defendant has admitted that he told the plaintiffs that the value of the property was about Rs. 9,000. I do not so read the defendant's deposition but assuming that he did make a statement as to the value of the property and that his deposition shows that statement was to the effect that the value was Rs. 9,000 and assuming further that was a false statement of the value of the property mortgaged, I am of opinion that the plaintiffs are still not entitled to the decree that they claim.

    11. Under Section 19 of the Contract Act, the rights given to a party, who has entered into a contract under fraud or misrepresentation, are to avoid the contract or to insist on the contract being performed. The section does not entitle the party to insist on an entirely different contract being performed. Moreover, the rights given by S. 19 are given only to a party whose consent to the contract was, in fact, caused by the fraud or misrepresentation. I agree with the trial Court that it is impossible to believe that the plaintiffs relied solely on the statement of the defendant as to the value of the property. They had materials or could have obtained them without much trouble on which to form an independent opinion of the value and I am convinced that it was not the statement of the defendant that induced the plaintiffs to enter into a contract and that any statement of the value made by the defendant does not entitle them to the decree that they claim. I dismiss the appeal with costs. I fix pleader's fee at Rs. 150.

    P.N/R.K

    12. Appeal dismissed.

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    Comments

    (Haji) Mahomed Haji Wali Mahomed v. Ramappa
    (Aug 12, 1929)