Kashinath Bhaskar Datar Vs. Bhaskar
Vishweshwar Karve [1952] INSC 8 (22 February 1952)
BOSE, VIVIAN FAZAL ALI, SAIYID
CITATION: 1952 AIR 153 1952 SCR 491
ACT:
Indian Registration Act (XVI of 1908), s. 17
(1)(b)--Subsequent document varying terms of previous document--Limiting and
extinguishing "interest" in immoveable property--Equitable doctrine
of part performance--Whether applicable.
HEADNOTE:
A suit to recover money based on two
mortgages was resisted by the defendant on the plea that the mortgages were
satisfied as the assignor of the mortgages to the plaintiff had executed an
agreement in favour of the defendant which proved satisfaction. This agreement
was not registered and the question for determination was whether it required
registration and whether if it did, it could not be used for the collateral
purpose of proving full payment of the mortgage amount. The agreement
contained, inter alia, the following terms: "(i) I am settling and
formulating new terms and I am confirming some very terms which were declared
before; (iii Although the rate of interest mentioned in the mortgage deeds is
14 annas still the actual rate is to be received at the rate of 8 annas and so
it is settled between the original parties; (iii) It was agreed that if you pay
me Rs. 1,800 in a lump it will be understood that the transaction has been
wholly completed and paid up. As you have no sufficiency of
funds.................. it is settled that you are to pay me Rs. 80 per month;
(iv) As mentioned above no interest of any nature whatever has remained
claimable by me............ and in like manner I understand whole of the
principal has been fully paid; (v) If you so wish or if necessity may arise
then at any time you may ask for it I shall give you this agreement written out
on stamp paper and on being registered." Held, that the agreement was not
exempt from registration because the document itself limited and extinguished
an "interest'' in immoveable property in the present within the meaning of
s. 17 (1)(b) of the Indian Registration Act, and it was not exempt under s. 17
(2) (v).
Held, also that the document could not be
used under the proviso to s. 49 of the Registration Act as the suit was not for
specific performance and no question of part performance arose in the case and
also no question of using the document for a collateral transaction arose
because the document was to be used to prove the very agreement which it
created itself.
U. Po Thin v. Official Assignee (A.I.R. 1938
Rang. 285) and Tikaram v. Deputy Commissioner of Bara Banki (26 I.A 97), Mahim
Chandra Dey v. Ram Dayal Dutta (A.I,R. 1926 Cal. 170).
492 Ram Ranjan v. Jayantilal (A.I.R. 1926
Cal. 906) and Collector of Etah v. Kishori Lal (A.I.R. 1930 All. 721) referred
to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 140 of 1951. Appeal from a Judgment and Decree dated 22nd September, 1947,
of the High Court of Judicature at Bombay (Sen and Bavdekar JJ.) in Appeal No.
41 of 1943 arising out of decree dated 4th September, 1942, of the Court of the
First Class Subordinate Judge at Poona in Civil Suit No. 808 of 1941.
Roshan Lal and B.S. Shastri for the
appellant. Hardyal Hardy for the respondent.
1952. February 22. The Judgment of the Court
was delivered by BOSE J.--This is a defendant's appeal in a suit on two
mortgages. The first was executed on the 7th of April, 1931, by the defendant
and his father. The second was dated the 17th of December, 1935, and was
executed by the defendant alone. The first was for a sum of Rs, 9,500, the
second for Rs. 3,500. The same property was mortgaged each time.
The claim on the two deeds together was for
Rs. 20,774-3-0.
These mortgages were in favour of one Narayan
Gopal Sathe. On the 28th of March, 1940, the mortgagee assigned them both to
the plaintiff who now sues on them.
The defence was that both mortgages were
satisfied.
The main evidence on which the defendant
relied to prove satisfaction was an agreement dated the 17th of October, 1937,
executed by the mortgagee Narayan Gopal Sathe in favour of the defendant. The
document has been excluded from evidence by the trial Court as well as by the
High Court on appeal on the ground that it required registration. If this
document is excluded, then there is a concurrent finding of fact by both the
Courts that the rest of the evidence is not good enough to prove satisfaction.
They have disbelieved it and decreed the plaintiff's claim in full. The only
questions before us are (1) whether this document required registration and (2)
whether, if it did, it 493 cannot still be used for what the defendant claims
is a collateral purpose, namely proving full payment of the mortgage amount.
The agreement came about in this fashion. The
mortgagee, Narayan Sathe, was appointed Receiver of two Cinemas in Poona. The
Court appointing him required him to produce a surety in the sum of Rs. 10,000.
The defendant agreed to undertake this responsibility and as a consideration
for that the mortgagee executed the agreement in question. The portions of the
document relevant for the present purpose are as follows. The mortgages are
there described as the "transactions of give and take." "(3) It
is extremely necessary to explain beforehand the transaction of give and take
outstanding between both of us...
(4) Whereas two transactions have been done
between you and me...Therefore you have agreed to stand surety...And only for
that reason I am executing this agreement and giving it to you in writing and
there under I am settling and formulating some new terms and I am confirming
some very terms which were declared before.
(5) Although in the matter of the transaction
relating to the aforesaid mortgage deeds the rate of interest mentioned in the
documents purporting to be the mortgage deeds is 14 annas per mensem per
centum, still the actual interest is to be received only at the rate of 8 annas
per mensem per centum; so it is settled between you and me and I have also
agreed to the same. And even at that rate I have also been receiving the
interest and I shall also receive hereafter...
(6) As regards the transaction of the second
mortgage deed...if as agreed at that time between you and me you pay me Rs.
1,800 in the lump then it will be understood that the transaction of give and
take subsisting between you and me has been wholly completed and fully paid up.
As you have no sufficiency of funds to make up and pay in full the above sum at
once it is settled that you are to pay to me Rs. 80 per 64 494 month and thus
you are to make payment in full...In accordance with the agreement arrived at
between us both subsequent to the document purporting to be the second mortgage
deed the said documents and papers and the written receipts in respect of
interest given to you by me relating to the payment in full made by you in
respect of interest and principal on account of the first transaction dated
7-4-31 have been kept with me.
* * (8) As mentioned above (vide paras 5 and
6) no interest of any nature whatever has remained claimable by me from you in
accordance with the agreement arrived at between us both from the date of your
suretyship onward and prior to it and in like manner I understand that the
whole of the principal has been fully paid.
(10) If you so wish or if necessity may arise
then at any time you may ask for it and I shall give you this agreement on
being written out on stamped paper and on being registered." In our
opinion, this is a document which limits and extinguishes interests in
immoveable property in the present within the meaning of section 17(1) (b) of
the Indian Registration Act. Clause (4) of the agreement expressly says so.
Referring to the two mortgages it says
"I am settling and formulating some new terms." This speaks from the
present. It does not say that this was some past agreement, and that fact is
underlined in the next sentence which reads-"and I am confirming some very
terms which were declared before." Among the new terms is the following.
The rate of interest agreed upon in the two mortgage deeds was 14 annas per
cent per month. Clause (5) reduces this to 8 annas. It is true that according
to clause (5) only 8 annas had actually been paid all along but that hardly 495
matters because the question is not what was paid but what was due and what the
mortgagee could have enforced under his bond. It is evident from clause (4)
that it was the agreement embodied in the document which effected the change
and therefore it was the document itself which brought the altered terms into
being.
The next question is whether this limits an
interest in immoveable property. We are of opinion it does. We agree with the
learned Rangoon Judges in U. Po Thin v. Official Assignee(1) that one part of
the "interest" which a mortgagee has in mortgaged property is the
right to receive interest at a certain rate when the document provides for
interest. If that rate is varied, whether to his advantage or otherwise, then,
in our judgment, his "interest" in the property is affected. If the
subsequent agreement substitutes a higher rate, then to the extent of the
difference it "creates" a fresh "interest" which was not
there before. If the rate is lowered, then his original "interest" is
limited.
The question of a higher rate was considered
by their Lordships of the Privy Council in Tika Ram v. Deputy Commissioner of
Bara Banki(2). There, the mortgagors gave the mortgagees an unregistered rukka
or written promise simultaneously with the registered mortgage stipulating that
they would pay an extra 6 per cent per annum over and above the 15 per cent
entered in the mortgage. their Lordships held that these rukkas could not be
used to fetter the equity of redemption. They did not decide whether the
personal covenant in the rukkas could be enforced because that point had not
been raised in the plaint and pleadings, nor did they refer to the Registration
Act, but we think the words "an unregistered instrument which the statute
declares is not to affect the mortgaged property" can only have reference
to that Act.
(1) (1938) R.L.R. 293: A.I.R. 1938 R. 285.
(2) (1899) 26 I.A. 97 at 100.
496 It was argued, on the strength of Mahim
Chandra Dey v. Ram Dayal Dutta,(1) Ram Ranjan v. Jayanti lal(2) and Collector
of Etah v. Kishori Lal(3), that it is always open to a mortgagee to release or
remit a part of the debt, and when he does so he does not limit or extinguish
an interest in immovable property any more than when he passes a receipt
acknowledging payment of the whole or part of the money. The effect of the
payment, or of the release, may be to extinguish the mortgage but in themselves
they do not limit the interest. Extending this, the learned counsel for the
defendant contended that when a mortgagee agrees to accept a lower rate of
interest he does no more than release that part of the debt which would be
covered by the difference in rate.
We do not agree. There is a difference
between a receipt and a remission or a release. A receipt is not the payment,
nor does the document in such a case serve to extinguish the mortgage or limit
the liability. It is the payment of the money which does that and the receipt
does no more than evidence the fact. Not so a release. The extinguishment or
diminution of liability is in that event effected by the agreement itself and
not by something external to it. If the agreement is oral, it is hit by proviso
4 to section 92 of the Evidence Act, for it "rescinds" or "modifies"
the contract of mortgage. If it is in writing, it is hit by section 17 (1) (b)
of the Registration Act, for in that case the writing itself "limits"
or "extinguishes" the liability under the mortgage.
It is to be observed that when the mortgagor
pays money due on the mortgage, in whole or in part, he is carrying out the
terms of the bond and is not making any alteration in it, and even though the
fact of payment may limit or extinguish the mortgagee's interest that is only
because the bond is working itself out by the force of its own terms and not by
reason of some new agreement which seeks to modify it or limit or extinguish
the interest which it creates. A simple test (1)A.I.R. 1996 Cal. 170. (3)
A.I.R. 1930 All. 721 at 725 F.B.
(2) A.I.R. 1926 Cal. 906.
497 is this: see whether the mortgagee can,
in the face of the subsequent agreement, enforce the terms of his bond. If he
cannot, then it is plain that the subsequent undertaking has effected a
modification, and if that has the effect of limiting or extinguishing the
mortgagee's interest, it is at once hit either by section 17 (1) (b) or section
92 proviso
4. But when there is a mere payment of money,
that is done under the terms of the bond, for the contract of mortgage
postulates that the mortgagor should repay the money borrowed and that when he
does so the mortgagee's interest in the property shall be "limited"
to the extent of the repayment or, when all is repaid, be wholly extinguished;
nor, of course, does a payment have to be made by a written or registered
instrument, or even evidenced by one. Clause (xi) to section 17 (2) of the
Registration Act is based on this principle. It draws a distinction between a
document which, by the force of its terms. effects the extinguishment, or
purports to do so, and one which merely evidences an external fact which brings
about that result.
Now apply the test just given to the present
case. Under the mortgages the mortgagee is entitled to interest at 14 annas per
cent. per month but the mortgagor says he cannot claim that. Why ? Because,
according to him, the subsequent agreement altered the terms of the bond and
reduced his liability to only 8 annas. It hardly matters what the agreement is
called, whether a release or a remission, nor is it germane to the question
that the mortgagee is entitled to remit or release the whole or a part of the
debt;
the fact remains that his agreement to do so
effects an alteration in the original contract and by the force of its terms or
extinguishes his interest, Assume that the mortgagor repaid the whole of the
interest at the altered rate and the whole of the principaL, would those
repayments by themselves effect an extinguishment of the mortgage ? Clearly
not, because unless the subsequent agreement is called in aid, more would be
due under the terms of the bond on account of the higher rate of interest. It
is evident then that it is the 498 agreement which limits the mortgagee's
interest' and serves to extinguish the mortgage and not mere payment at the
reduced rate.
Similar observations apply to clause (6) of
the agreement. It begins by reciting a past agreement in which the mortgagor
had promised to pay Rs. 1,800 in a lump sum. We are left to infer that this was
to extinguish the mortgage.
If it was, then it would be hit by either
section 92, proviso 4, of the Evidence Act or section 17(1)(b) of the Registration
Act, but that does not matter because the present document varies even that
agreement and substitutes a third agreement in its place, namely that payment
of Rs. 1,800 by installments at the rate of Rs 80 a month will effect "payment
in full", that is to say, will extinguish the mortgage.
This speaks from the date of the document,
for it says, referring to this agreement, that ' it is settled" etc.
Next we come to clause (8). That refers us
back to clauses (5) and (6) and says that "as mentioned there no interest
of any nature whatever has remained claimable by me" and speaking of the
principal says "and in like manner I understand the whole of the principal
has been fully paid". We have already dealt with clauses (5) and (6).
Clause (8) carries us no further and merely states that because of clauses (5)
and (6) neither interest nor principal is now claimable; and of course if
neither interest nor principal is claimable that extinguishes the mortgage, and
in this case the extinguishment is brought about, not by mere payment in
accordance with the terms of the bond, but because of the fresh agreement.
Clause (10) remains for consideration. It was
argued that this brings the matter within section 17(2) (v) of the Registration
Act because it gives the defendant the right to obtain another document which
will effect the extinguishment. We do not agree because clause (v) of
sub-section (2) of section 17 of the Act postulates that the document shall not
of itself create, declare, 499 assign, limit, extinguish any right etc., and that
it shall merely create a right to obtain another document etc. (The stress is
on the words "itself" and "merely ". ) We agree with Sir
Dinsha Mulla at page 86 of the 5th edition of his Indian Registration Act that
"If the document itself creates an interest in immoveable property, the
fact that it contemplates the execution of another document will not exempt it
from registration under this clause." As we have seen, this document of
itself limits or extinguishes certain interests in the mortgaged property),.
The operative words are reasonably clear.
Consequently, the document is not one which merely confers a right to obtain
another document. It confers the right only in certain contingencies, namely,
"if you so wish" or "if necessity may arise." Its purport
is to effect an immediate alteration in the terms of the two bonds and because
of that alteration to effect an immediate extinguishment and limitation. Clause
(10) merely confers an additional right, namely the right to obtain another
document "if you so wish" or "if necessity may arise."
Therefore, the document in question is not one which merely creates a right to
obtain another.
An agreement to sell, or an agreement to
transfer at some future date, is to be distinguished because that sort of document
does not of itself purport to effect the transfer. It merely embodies a present
agreement to execute another document in the future which will, when executed,
have that effect. The document in hand is not of that type.
It does not postpone the effect of
extinguishment or limitation of the mortgages to a future date. It does not say
that the agreement it embodies shall take effect in the future. It purports to
limit and extinguish the liabilities on the two mortgages at once by virtue of
the document itself and merely adds that "if it is necessary or should you
want another document, I will repeat the present 500 agreement in a registered
agreement." By implication it means that if it is not necessary, or if the
mortgagor does not want a registered instrument, the document itself will have
effect. Incidentally, one effect of holding that this document does not limit
or extinguish the mortgagor's liability would be that there is no agreement to
that effect yet in force, This may or may not give the mortgagor a right to
obtain specific performance of his right to obtain such an agreement but until
he does that there would be no bar to the mortgagee's claim in this suit.
However, it is not necessary to go as far as that because we are of opinion
that this document is not exempt from registration under section 17(2) (v), and
we so hold.
The next question is whether the document can
be used in evidence under the proviso to section 49 of the Registration Act. We
are clear it cannot. This is not a suit for specific performance nor does any
question of part performance under section 53A of the Transfer of Property Act
arise. It remains then to be seen whether the use now sought to be made of the
document is to evidence a collateral transaction not required to be evidenced
by a registered instrument.
But what is the 'transaction sought to be
proved but the very agreement which the document not merely evidences but, by
reason of its own force, creates ? That is not a collateral transaction and
even if it were a transaction of that type, it would require a registered
instrument for the reasons we have already given.
Section 53A of the Transfer of Property Act
was referred to but it has no application, for the agreement we are concerned
with is not a transfer. There are no words of conveyance in it; also the
mortgagor is not continuing in possession in part performance of the contract.
Both mortgages were simple and the right to possession never resided in the
mortgagee. He might in due course have acquired it by process of law if he
obtained a decree and purchased at the sale; on the other hand, a stranger
might have purchased and the right to possession would 'in that event have
passed elsewhere, But he had no right to possession at the 501 date of the agreement
and having none he could not have transferred it. The mortgagor's possession
was consequently not referable to the agreement. The appeal fails and is
dismissed with costs.
Appeal dismissed.
Agent for the appellant: Ganpat Rai.
Agent for the respondent: A.C. Dave.
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