Chidambaraiyer & Ors Vs. P. S.
Renga Iyer & Ors  INSC 131 (6 May 1965)
06/05/1965 SUBBARAO, K.
DAYAL, RAGHUBAR BACHAWAT, R.S.
CITATION: 1966 AIR 193 1966 SCR (1) 168
Madras Agriculturists Relief Act (Mad. Act IV
of 1938), as amended by Act XV of 1943 and Act XXXII of 1943, s. 9-A(10) (ii)
(b)-Mortgage debt not to be scaled down if mortgagee's rights transferred boa
fide for valuable consideration- Transfer of Mortgagee's rights to family
charity in lieu of sum earlier dedicated to the charity-Such transfer whether
for valuable consideration within the meaning of proviso.
The predecessors-in-interest of the
appellants executed in 1930 a registered mortgage deed (Ex.A-1) in favour of
the respondent family for Rs. 31,000. It was a usufructuary mortgage redeemable
after 60 years. The mortgagors filed a petition under s. 9A and s. 19A of the
Madras Agriculturists Relief Act for scaling down the mortgage debt there under.
The mortgagees raised a plea, inter alia,
that the mortgage interest had been transferred to a charity for valuable
consideration and therefore s. 9A(10)(ii)(b) of the Act was not attracted and
hence the mortgage debt was not liable to be scaled down under the Act. The
plea was based on documents Ex.B-1, Ex.B-2 and Ex.B-3. The learned Subordinate
Judge, held that the transferee-the charity--not being a transferee for
valuable consideration s. 9A(10) (ii) (b) did not apply, and on this finding he
scaled down the mortgage debt. An appeal was filed by the mortgagees wherein
the High, Court held that the transfer was for valuable consideration and
therefore the debt could not be scaled down. The mortgagors appealed to the
Supreme Court with certificate.
HELD : (i) The agreement Ex.B-1 executed
between members of the mortgagee family showed that on August 22, 1934, the
family created a trust in respect of a sum of Rs. 36,988-9-8 for a charitable
purposes. On September 3, 1939, by EX.B-2, the usufructuary mortgagee right of
the family in Ex.A-1 was given to the charity in discharge of the obligation
under Ex.B-1. The dedication of the said property was affirmed by the regular
partition deed Ex.B-3. In short under the said documents the family transferred
to the charity their interest in the usufructuary mortgage Ex.A- 1 in discharge
of the obligation to pay the trust a sum of Rs. 36,988-9-8. [174 E-G] (ii) It
is implied in the definition of the word 'consideration' in s. 2(d) of the
Contract Act that the consideration should be 'something which not only parties
regard but the law can regard as having some value'. It is apparent from the
definition that consideration may be negative or positive. [177 A-B] (iii) In
the present case the family was under an obligation to pay to the charity the
amount set apart to it under Ex.B-1. The mortgage interest was transferred in
discharge of that obligation. That is to say the charity agreed as a
consideration for the transfer of the mortgage interest not to enforce its
right to recover that amount from the family. The charity gave up that right in
consideration of the mortgage interest acquired by it.
Therefore it is clear that the family
transferred the mortgage interest in trust to the charity for valuable
consideration with the meaning of s. 9A(10)(ii)(b) of the Act. [177 B-D] 169 It
allowed that the mortgage, Ex.A-1, was rightly held by the High Court not
liable to be scaled down under the provisions of the Act. [177D]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 200 of 1963.
Appeal from the judgment and order dated
November 8, 1955, of the Madras High Court in A.A.0. No. 577 of 1952.
R. Ganapathy Iyer, S. N. Prasad, and J. B.
Dadachanji, for the appellants.
K. N. Rajagopala Sastri, M. R. Krishna Pillai
and M. S. K. Aiyangar, for respondent no. 1.
The Judgment of the Court was delivered by
Subba Rao, J. This appeal by certificate raises the question of the
applicability of s. 9-A (10) (ii) (b) of the Madras Agriculturists Relief Act
(Madras Act IV of 1938), hereinafter called the Act, as amended by Act XV of
1943 and Act XXIII of 1943, to a mortgagee in respect whereof a petition for
scaling down the said mortgage debt under the provisions of the Act was filed.
On August 18, 1930, the
predecessors-in-interest of the appellants executed a registered deed of
usufructuary mortgage in favour of the family of Samu Pattar for Rs. 31,000. No
interest was stipulated in the document, but the mortgagee was put in
possession of the mortgage property.
The mortgagee had to enjoy the income from
the said property, and after appropriating interest due on the mortgage and
after paying the revenue and the jenmi's purappad, he was to pay to the
mortgagors one edangali of paddy every year within the 30th of Makarom. The
mortgage was redeemable after the expiry of 60 years from the date of the
mortgage. The 11th appellant and his deceased father, Narayana lyer, filed O.P.
No. 43 of 1949, on the file of the Court of Subordinate Judge, Palghat, under
s. 9-A and 19-A of the Act for scaling down the mortgage debt thereunder.
To that petition, appellants 1 to 10 and
other mortgagers were impleaded as respondents 2 to 14, and the mortgagee, as
the first respondent. As the said first respondent- mortgagee raised the plea
that the mortgage interest had been set apart by the members of his family to a
charity, respondents 15 and 16, who were the senior most male members of their
respective branches of the mortgagee family, were also impleaded as respondents
to the said petition.
The contesting respondents, inter alia,
raised two pleas, namely, (1) the mortgage property was transferred in trust to
170 the charity for valuable consideration and, therefore, s. 9- A(10) (ii) (b)
of the Act was attracted and hence the mortgage was not liable to be scaled
down under the Act; and (2) the said mortgage right was the subject-matter of a
partition amongst the several members of the joint family consisting of
respondents 1, 15, 16 and others and, therefore, the said mortgage was exempted
under s. 9-A ( 1 0) (ii) (c) of the Act from its operation.
On the first question the learned Subordinate
Judge held that "The transferee, viz., the charity, not being a transferee
for valuable consideration" the proviso to s. 9- A(10)(ii)(b) did not
apply; and on the second question he held that the partition of the family in
the sense of division in status was effected before the relevant period and,
that apart, as the mortgage interest of the family was not allotted to some or
one of the members of the family but a trust was created in respect thereof in
favour of a charity s. 9-A(10)(ii)(c) had no application. In the result he
allowed the petition and granted a certificate to the petitioners and
respondents 2 to 14 to the effect that the amount due under the mortgage on the
date he made the order was Rs. 8.788-14-10.
As the first respondent died pending the
proceedings in the Court of the Subordinate Judge, the 17th respondent, his
younger brother, was brought on record in his place.
Against the order of the learned Subordinate
Judge, the 17th respondent preferred an appeal to the High Court of Judicature
at Madras, being A.A.0. No. 557 of 1952. To that appeal, the petitioners and
other respondents were made respondents. On the first question, the High Court
held that the family transferred the mortgage interest for valuable consideration
in favour of the charity within the meaning of para (b) of s. 9-A(10) (ii) of
the Act; and on the second question it held that the expression "
partition" in s. 9-A(10)(ii)(c) meant partition by metes and bounds and
though it was effected during the relevant period the mortgage interest in the
property was not the subject of partition and, therefore, the said provision
was not attracted to the mortgage in question. In the result, the High Court,
disagreeing with the view expressed by the learned Subordinate Judge, set aside
the order made by him and dismissed the petition filed by the mortgagors for
scaling down the debt. Against the said order the mortgagors have preferred, on
a certificate issued by the High Court, the present appeal to this Court.
171 Mr. Prasad, learned counsel for the
appellants contended that (i) there was no transfer of the mortgage property in
trust for a charity but the said property continued to be the property of the
joint family, though a charge was created on its income for some charitable
purposes; and (ii) there was no transfer of the mortgage interest for valuable
Mr. Rajagopala Sastri, learned counsel for
the respondents, apart from attempting to sustain the finding of the, High
Court that there was a transfer of the mortgage property for valuable
consideration, contended that the transfer of the mortgage property in trust
was an integral step in the process of partition and, therefore, in law and in
fact it must be held that the said property was also subject of partition
within the meaning of para (c) of s. 9-A (10) (ii) of the Act.
At the outset it will be convenient to read
the relevant provisions of s. 9-A (10) (ii) of the Act.
"Nothing contained in this section,
except subsections (1) and (2), shall apply to any mortgage- (ii) in respect of
property situated in any other area in the cases mentioned below :- (a) Where
during the period after the 30th September 1937 and before the 30th January
1948..................." (b) Where during the period aforesaid, the
mortgagee or any of his successors-in-interest has interest belonged to, or
devolved on, two or more gage's rights in the property bona fide and for
valuable consideration,' then, to the whole or such part, as the -case may be
(c) Where the mortgagee's interest in the property subject to the mortgage or
any part of such interest belonged to, or devolved on, two or more persons and
during the period aforesaid, a partition has taken place among such persons,
then, to the whole or such part of the interest, as the case may be.
It will be seen from the said provisions, so
far relevant to the present enquiry, that the mortgagee's rights under para (b)
or mortgagee's interest in the property shall have been bona fide transferred
for valuable consideration or shall have been partitioned Sup.165-12 172 among
the joint owners during the period between September 30, 1937, and January 30,
1948, in order to earn the exemption from the operation of the provisions of s.
9-A(10) (ii) of the Act. As we agree with the High Court that the mortgage
interest was transferred for valuable consideration within the meaning of para
(b) of s. 9-A ( 10) (ii) of the Act, we are relieved of the necessity to
consider either the scope or the applicability of para (c) of the said section
to the mortgage in question.
Under para (b) of s. 9-A (10) (ii) of the Act
two questions arise, namely, (1) whether the mortgage rights in the property
were legally transferred in trust in favour of the charity; and (2) if so,
whether the transfer was for valuable consideration. If there was such a
transfer, it is not disputed that it was effected during the relevant period
mentioned in the section.
Exhibit B-1 is an agreement dated August 22,
1934, executed between the members of the mortgagee-family. The relevant part
of the document reads :
"All of us have out of our free will and
consent set apart on this day the sum of Rs.
36,988-9-8 found entered against the date
30th Meenom 1109 M.E. (12th April 1934) in the ledger book under the head
"kulathoorayyan" in the accounts maintained in respect of our common
family business, the interest accrued thereon from the aforesaid date, the sum
of Rs. 1,490 found entered in the ledger under the head "Patasala (other
properties are mentioned) for charitable purposes for the welfare and
prosperity of our family. And it is stipulated that the undermentioned
ceremonies shall be performed with the income derived from the aforesaid
properties. . . . . .
(specific amounts to be spent for different
purposes are given) It has been stipulated that the management of the aforesaid
properties endowned for purposes of charity shall be conducted by the senior most
male members of the respective branches for each year by rotation, commencing
from first Kanni 1110 M.E. (17th September 1934) and the accounts shall be
rendered to the satisfaction of the members of the rest of the branches at the
end of the year." The recitals of this documents are clear and
Under this document the members of the family
set apart a specific 173 amount and other properties for charitable purposes.
Under the scheme of administration the senior most male members of the
different branches of the family were constituted the managers and they were
directed to pay specified amounts for specific religious purposes. The members
of the family were the authors of the trust. The senior most male members of
the respective branches were the trustees. The charity was the beneficiary. The
subject-matter of the trust was the said amount and the properties. All the
necessary ingredients of a trust are present in. the document. It is,
therefore, clear that the document created a valid trust of the said amount.
Exhibit B-2 dated September 3, 1939, is a
part of "schedule, of partition allotted to the members of the E.N.A.S.
family". It reads :
"Particulars regarding the properties
that have been set apart for charity from our joint family.-
1. Properties situate in Kunisseri Amsom
which belong to N. C. Sivarama Ayyar of Nellisseri Grammom and others and which
belong to our family in (usufructuary mortgage) right for a sum of Rs. 31,000
and which are held benami in the name of Appathura Pattar alias Seshan Pattar
of Melkode Grammom." The document contains other items of properties set
apart for charity.
Exhibit B-3, the registration copy of the
partition deed dated September 9, 1939, shows that the schedule was prepared in
connection with the oral partition agreed upon on September 3. 1939. After
orally dividing the properties among the members of the family and setting
aside the said mortgage interest and other properties for charity, on September
9, 1939, the said registered partition deed was executed embodying the terms of
the oral partition. It is common knowledge that before a regular registered partition
deed is effected, there will necessarily be a stage when the terms embodied in
the registered document are agreed upon orally between the parties. It is a
necessary prelude for executing the formal document. Ex. B-3 appears to be such
a document embodying the terms orally agreed upon between the parties at an
earlier stage. This document governs the rights of the parties. The relevant
recital in the document reads :
"Out of the immovable properties which
were set apart previously as mentioned in paragraph 2 above, which were
reserved in common at that time and which 174 were acquired subsequently, some
immovable properties were set apart under schedule 1 for our common family
" private trust" for the purpose of charity. Under the oral partition
effected on 3rd September 1939 all the immovable properties belonging to our
common family excluding those set apart for charity as stated above were
partitioned into 9 schedules from A to I in accordance with our proportionate
shares.......... But whereas we have all agreed that the management in respect
of the properties in the aforesaid schedule I set apart for charitable purpose
and the expenses, etc. to be met with the income shall be conducted and caused
to be conducted without default as set out in the aforesaid agreement entered
into between us on 22nd August 1934 and that we shall also conduct ourselves in
future in accordance with the terms of the said agreement, no special
stipulation has been made in this partition deed with regard to the above mentioned
properties endowed for charitable purpose and the incomes derived there from."
This registered partition deed in terms affirmed the earlier creation of trust.
From these documents it can be reasonably
held as follows (1) On August 22, 1934, the family created a trust in respect
of a sum of Rs. 36,988-9-8 for charitable purposes;
(2) on September 3, 1939, the usufructuary
mortgagee right of the family in Ex. A-1 was given to the charity in discharge
of the obligation undertaken under Ex. B-1; and (3) the dedication of the said
property was affirmed in the regular partition deed. In short, under the said
documents the family transferred to the charity their interest in the
usufructuary mortgage, Ex. A-1, in discharge of their obligation to pay the trust
a sum of Rs. 36,988-9-8. Indeed the High Court, on a consideration of the said
documents arrived at exactly the same finding. The learned Judges of the High
Court observed :
"On a comparison of the charity
properties mentioned in Exhibits B-1 and B-2, we find that item No. 3 in
Exhibit B-1 is the same as item No. 2 in B-2. Similarly item No. 4 in Exhibit
B-1 corresponds to item No. 3 in Exhibit B-2. Item No. 5 in Exhibit B-1 is
admitted to be item No. 4 in Exhibit B-2 and item No. 6 in Exhibit B-1 is the same
as item No. 5 in Exhibit B 2. Items Nos. 1 and 2 in Exhibit B-1 are not
mentioned 175 in Exhibit B-2, but they are replaced by item No. 1 in Exhibit
B-2 which is the mortgage.
It is seen that items 1 and 2 in Exhibit B-1
are credit entries of the aggregate amounts in the family business accounts but
what is done by Exhibit B-2 is the replacement of those amounts by the mortgage
in question. No evidence has been let in as to what has become of those two
amounts. Evidently being credit entries they have been converted into tangible
immovable assets for the purposes of con- ducting the charity. It is more or
less in the nature of substituting a credit entry by means of sot-De property,
i.e., the discharge of the liability of those credit entries by setting apart
immovable property. Exhibit B- 3, dated 9th September 1939 is a registered copy
of the partition deed by the members of the family and paragraphs 2 and 4 of
that document make provision with regard to the matters in question which run
as follows Later on the learned Judges proceed to state "We are unable to
accept the arguments for the reasons stated already. It is clear as we have
referred to already that for the amounts entered as credit in the family
business account which was a liability payable by the family from and out of
the interest under Exhibit B-1 the religious functions have to be performed and
that there was a substitution of the mortgage amount under Exhibit B-3. Mr.
Ramachandra Aiyar contends that there is no
oral evidence about that substitution; nor is it possible to conclude from the
meagre and scantly documentary evidence let in that there has been any such
substitution. The answer to this argument is that the credit amount in favour
of Kolathu lyen is only a ledger entry making the liability on the family with
regard to a sum of money out of which certain charities have to be performed.
In Exhibit B- 3 we do not find any credit entry in the name of Kolathu lyen as
well as patasala account.
Those liabilities must be deemed to have been
discharged by item I in Exhibit B-2, namely, the mortgage amount. The result is
the dis- charge of one liability by another and we are unable to see that such
a state of things would not amount to a transfer." 176 These observations
also make it clear that the learned Judges clearly held that the mortgage
interest in Ex. A-1 was transferred in discharge of the liability undertaken
under Ex. B-1. But strong reliance was placed by the learned counsel for the
appellants on the following concluding observation of the learned Judges
"In the present case the joint family has lost the mortgage interest and
the trust has gained that interest. Therefore the transfer under Ex. B-3 must
be deemed to be for valuable consideration." Relying upon this observation
the learned counsel commented that the learned Judges held that a mere transfer
of an interest in favour of another was in itself a transfer for valuable
consideration. To accept this argument is to ignore the elaborate discussion
that preceded the said observation and the relevant extracts from the judgment
we have extracted earlier. In the context of the preceding discussion the said
observation can only mean that the transfer in favour of a charity in discharge
of the earlier obligation is a transfer for valuable consideration. Agree- ing
with the High Court, we hold that there was a transfer of the mortgage interest
under Ex. A-1 in trust to a charity in discharge of an earlier obligation
undertaken by the family to set apart a sum of Rs. 36,988-9-8 in favour of the
charity. Under para (b) of s. 9-A (IO) (ii) of the Act, to attract that
provision the transfer shall be for a valuable consideration. The short
question, therefore, is whether the transfer in trust of a property in
discharge of an earlier obligation was for valuable consideration within the
meaning of para (b) of s. 9-A(10)(ii) of the Act. So stated there can only be
one answer. The classic definition of "valuable consideration" is
given in Currie v. Misa(1) thus "A valuable consideration in the sense of
the law may consist either in some right, interest, profit or benefit accruing
to one party, or some for be arance, detriment, loss or responsibility, given,
suffered or undertaken by the other." Section 2 (d) of the Contract Act
defines consideration thus "When, at the desire of the promisor, the
promisee or any other person has done or abstained from doing, or does or
abstains from doing, or promises to do or to abstain from doing something, such
act or abstinence or promise is called a consideration for the promise."
(1875 L.R. 10 Ex. 162.
177 So far as is relevant to the present
enquiry, the content of the two definitions is practically the same, though the
expression " valuable" is implied under s. 2(d) of the Contract Act,
for consideration shall be "something which not only parties regard but
the law can regard as having some value". From the definitions it is
apparent that consideration may be negative or positive. In the present case
the mortgage interest was transferred in trust to the charity. What was the
consideration that passed from the charity to the family ? The family was under
an obligation to pay to the charity the amount set apart to it under Ex. B-1.
The mortgage interest was transferred in discharge of that obligation. That is
to say, the charity agreed as a consideration for the transfer of the mortgage
interest not to enforce its right to recover that amount from the family.
The charity gave up that right in.
consideration of the mortgage interest acquired by it. We, therefore, hold that
the family transferred the mortgage interest in trust to the charity for
valuable consideration within the meaning of s. 9-A(10)(ii)(b) of the Act. It
follows that the mortgage, Ex. A-1, was rightly held by the High Court not
liable to be scaled down under the provisions of the Act.
In the reply the learned counsel for the
appellants sought to raise another plea, namely, that there was no valid
transfer of the mortgage deed in favour of the charity inasmuch as the said
transfer was not affected by a registered document. This plea was not raised at
any stage of the litigation, presumably because Ex. B-3 was a registered
document. We cannot, therefore, permit the appellants to raise the plea for the
first time before us. In this view it is not necessary to express our opinion
on the question whether para (c) of s. 9-A (10) (ii) of the Act was attracted
to the mortgage in question.
In the result, the appeal fails and is
dismissed with costs.