TMI Blog1963 (12) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... e deposit of title deeds of certain properties in the former princely State of Cochin. The debt for which the said deposit was made was the principal and interest due on two promissory notes for ₹ 50,000 and ₹ 30,000 respectively which were marked as Exs. A B in the case. It was not in dispute that the property which was the subject of mortgage belonged to the joint family composed of the 1st defendant and his son-the appellant. The appellant was a minor on the date of the suit-transaction and even at the date of the suit. To the suit that it filed the Bank impleaded not merely Kalyanasundaram and his minor son, but the latter's sisters and mother and even the lessees of the mortgaged property. These were defendants 3 to 11. They, however, have dropped out of the proceedings at earlier stages and the only parties to the appeal whose rights we are called on to adjudicate are the Bank and the appellant. The Bank's suit was decreed by the trial court against the father-Ist defendant and there was no appeal against it and that decree is no longer in challenge. The trial Judge however held that the Bank had no right to obtain a mortgage decree against the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings giving rise to this appeal. A few months later, on February 20, 1946 he executed another promissory note which is marked as Ex. 'C' for ₹ 30,000. That also was accompanied by a further deposit of title deed which is recorded in Ex. 'F' , but that was in part in relation to the family properties in Palghat in the State of Madras. As the amount due under these notes was not repaid at the time promised, the Bank filed the suit out of which the present appeal arises, in the Court of the Subordinate Judge, Chittur, which is in the Cochin State, for a mortgage decree in its favour for the amount of all the three promissory notes with the interest due thereon, though a mortgage decree was sought only against the properties in Cochin which were set out in the Schedule to the plaint. This suit was filed on June 17, 1948 but before the filing of the suit certain events happened to which it would be convenient to refer at this stage, because they figure largely in the defences that were raised in the suit on behalf of the appellant who was represented by his mother as guardian ad litem. On March 23, 1948 a petition for permission to file a suit in form pau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the son in that behalf. One of the questions arising in the appeal is as regards the effect of this partition on the rights of the Bank to realise the moneys due to it from the share allotted to the son in the Cochin properties which were mortgaged under Ex. 'E.' Reverting to the proceedings giving rise to this appeal, to the mortgage suit filed by the Bank several defences were raised on behalf of the appellant. It is not necessary to set out all of them but it would sufficient if those which have a bearing on the points urged before us are mentioned. Before dealing with the controversial issues we may state that there were a few to which it is sufficient to make a passing reference. There was a formal denial of the truth and validity of the promissory notes and the passing of consideration thereunder and also about the sufficiency or admissibility of the memorandum Ex. 'E' to create a mortgage by deposit of title deeds. These do not appear to have been seriously pressed and have been found in favour of the plaintiff-bank. There was also an issue that the suit-debt was tainted with illegality and immorality, but on the facts it was such an untenable plea that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repayment of a debt was conceived of not merely as a legal obligation which had been undertaken when the debt was incurred but non-repayment was considered a sin. The duty of relieving the debtor from this sin was fastened on his male descendents to the third degree. The duty being thus religious, it was held not attracted if in its nature it was illegal, or immoral i.e., avyavaharika. Whatever might have been the extent of the son's liability according to the Hindu law givers, under the Mitakshara law as administered in all the States, the liability of the son, grandson, great grand son etc., was not treated as a personal liability but as dependent on his becoming entitled to family assets and that it extended to the entirety of his interest therein, but no more. The authorities to which it is wholly unnecessary to refer, have firmly established the following and the position is not in doubt: (1) A father can by incurring a debt, even though the same be not for any purpose necessary or beneficial to the family so long as it is not for illegal or immoral purposes, lay the entire joint family property including the interests of his sons open to be taken in execution procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be binding against the joint family property in the hands of the son even if the debt be not antecedent to the creation of the mortgage on the doctrine of the latter's pious obligation to discharge them. This was on the principle enunciated by Bashyam Ayyangar in Chidambara Mudaliar v. Kootha Perumal(3) (a decision, however, subsequently overruled by a Full Bench of the Madras High Court in Venkataramayya V. Venkataramana() I.L.R. 29 Mad 200) on the ground that it was inconsistent with several earlier rulings of the Privy Council) that it was difficult to make any distinction between a mortgage created for the discharge of an antecedent debt and a mortgage created for a debt then incurred, for in either case the debt not being avyavaharika is binding upon the son and the enforcement of the security exonerates the son from the burden of the father's debt. It would, therefore, be seen that if it were found that the debt to the Bank was not incurred for purposes necessary or beneficial to the family, the question whether the Hindu law rule applicable was the one as understood and applied in Cochin or that expounded in Brij Narain(1) would assume great importance, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght be mentioned that the Bank is stated to have subsequently filed a suit for that sum in the court in Palghat and has obtained a decree thereon. We are setting out these matters for pointing out that the appeal is practically confined to the binding character of the mortgage--ExE in so for as it secured the repayment of the debts evidenced by. Exs. A B. Learned counsel for the appellant urged the following contentions in support of the appeal: (1) The finding by the High Court that the partition of the family properties effected between the appellant and his father was not bona,' fide was not justified on the, admitted facts and was based on erroneous reasoning. (2) The learned Judges erred in holding that the Hindu Law as understood and applied by the Courts in the previous Cochin State could determine the liability of the appellant who was a resident of Palghat. (3) The learned Judges erred in their finding that the mortgage evidenced Sy Ex. 'E' was to any extent for the discharge of antecedent debts. The first question that falls for decision and of which the learned Judges of the High Court difference from the trial Judge was in relation to the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of the debts or not, would have to be decided on the facts and circumstances of each individual case. We can conceive of cases where the property allotted to the father in his own legitimate share was considered, more than enough for his own necessities and he- undertook to pay off all his personal debts and release the sons from their obligation in respect there That may also be considered to be a proper arrangement for payment of the creditor in the circumstance of a particular case. After all the prima liability to pay his debts is upon the father himself and the sons should not be made liable if the property in the hands of the father is more the adequate for the purpose. If the arrangement made at the time of partition is reasonable a proper, an unsecured creditor cannot have an reason to complain. The fact that he is no party to such arrangement is, in our opinion immaterial of course, if the transaction is fraudulent or is not meant to be operative, it could be ignored or set aside; but otherwise it is the duty of unsecured creditor to be on his guard lest any family property over which he ha no charge or hen is diminished for purpose of realization of his dues........ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing then to deal with the matter, we must first observe that the onus of proving that the partition arrangement is fair and bonafide in the sense explained by this Court in Panna Lal's case([1952] S.C.R. 544) was upon the appellant, and that the approach of the learned trial Judge to the question is vitiated by casting the burden of proving that the arrangement was mala fide on the creditor Bank. And for this reason. At the moment the liability was incurred by the father the creditor had a right to proceed against the entirety of the joint family estate including the share of the son since, the debt not being avyavaharika, the son was under a pious obligation to discharge it out of family property. Subsequent thereto a partition takes place by which the share of the son in the property is separated and vested in him, free from the rights and powers of the father. It is the plea of the son that by reason of an arrangement which he has entered into or which has been entered into on his behalf, he has discharged himself from liability to the creditor an arrangement to which the creditor is not a party but which under the law is binding on the creditor provided the arrangement fulf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated their reasons were two fold: (f) That the partition was brought about in order to forestall the action of the creditors of the father, who sought to proceed against the family properties and so the transaction bore the stamp of mala fides. We have already referred to the suit in forma paupereis filed at the Sub-Court, Palghat for the partition of the Palghat properties. In that plaint, and this also has already been adverted to a arg number of debts were set out and in regard to some of them the plaintiff claimed the relief of having them set aside on the ground that they were incurred for illegal or immoral purposes and so were not binding on him. The allegations in that plaint, therefore, made it clear that there were a number of creditors who had filed suits against the father and that was heavily pressed for discharging them. It was in that situation that the suit in Palghat was filed And it was when things were in this state that the partition of the Cochin properties was brought about This necessarily showed that the partition was not bona fide. (2) In the deed of partition-Ex. there is a recital that the debt due to the Bank was not binding on the appellant. There wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. As a matter of fact the 1st defendant in his cross examination stated: The properties partitioned and allotted to me (under Ex. 6) will fetch a pattom of 2,000 and odd (paras of paddy). I have got debt to the extent of ₹ 80,000. It is the debt under Exs. A B. I have to pay other amounts to the bank. I have to pay a debt of about ₹ 2,00,000 to the bank. In addition to that I have also got other debts to the extent of more than rupees one lakh. The decrees obtained against me will come to more than ₹ 50,000-60,000. They are decrees obtained against me. This would disclose two infirmities in the appellant's case: (1) No provision was admittedly made under Ex. VI for the payment of all the debts of the father and there were considerably more debts payable by him than those for which provision was made for the discharge out of properties allotted to him. (2) There was no acceptable evidence regarding the value of the properties in Palghat and therefore one cannot proceed on the basis that the share of the father in the Palghat properties would be sufficient to discharge the debts not provided for under Ex. VI. Learned counsel for the appellant faintly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled to a mortgage decree for the entire sum even though ₹ 20,000 and odd of it was held not to be for the discharge of any antecedent debt. Learned counsel for the appellant challenged the correctness of this reasoning and the application of the rule of the lex situs to a case like the present. We agree that the learned Judges were not right in the view they expressed about the applicability of this rule of Private International Law. The rule that they applied to determine the rights to immovable property in Cochin was not any statutory law which was binding on parties who had dealings in regard to land in that State in which event their reasoning was unexceptional. Taking the Cochin State itself, the power of a person to dispose of property or to encumber it would have depended upon whether he was a Hindu or a Muslim or a Christian and in each case the right of the owner to dispose of the property would depend upon his Personal Law as modified by any statute applicable to that community to which he belonged. There was in the matter of dispositions of the type we have to deal with in this case, no lex situs which could be applied irrespective of a personal law governing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o any family which, by local usage, had acquired any special custom of succession, or the like, peculiar to itself, though differing from that either of its original, or acquired domicile The reason is that in India there is no lex loci, every person being governed by the law of his personal status. In the present case on the concurrent finding of the two courts that the family of the defendants were permanent residents of and domiciled in Palghat it would follow that the binding character of the father's alienation by way of mortgage quoad the son had to 'be judged in the light of the principles laid down from very early times by the Privy Council and accepted by the Full Bench decisions of the Madras High Court and finally authoritatively expounded in Brij Narain v. Mangla Prasad(1) which has received the approval of this Court. When the Bank dealt with the 1st defendant, it must be taken to have contracted with him on the basis of such a law being applicable to the transaction, so that there is no question of hardship arising from the application of the British Indian Law to determine the scope of the father's powers. This leads us to the third and last point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e father was immaterial and nothing more was needed for the plaintiff to succeed in obtaining a mortgage decree as against the entire family property including the son's share therein than a finding by the Court that the debt was not illegal or immoral. In fact, even the allegation in the Bank's plaint that the debt was for the purpose of financing a family trade was superfluous, and the negativing of its averment in that regard would not have affected its rights in any manner. In the circumstances, the Bank could not be seriously blamed if it considered that the question whether there was not an antecedent debt which the mortgage under Ex. E discharged was not relevant at all and made no averment asserting such a fact. Accordingly no attention was apparently paid by either party to this question. By the date, however, of the arguments before the learned trial Judge the princely State of Cochin had acceded to the Indian Union and had become a Part 'B' State under the Constitution. Founding himself on this circumstance as also the fact that the defendants were permanent residents of and domiciled at Palghat learned,counsel for the appellant submitted to the trial Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) were applied, the bank would have been entitled to a mortgage decree only in respect of the principal sum of ₹ 59,000 and odd and to a personal decree for the balance to be recovered out of the share of the appellant in the family property on the finding that the partition Ex. VI was not bonafide and therefore not impeding the rights of the creditor, they, nevertheless proceeded to grant a decree to the Bank for the entire sum due on the two promissory notes-Exs. A and B for the reason that they considered that the law applicable to determine the rights of the Bank was not the Mitakshara law as understood and explained in Brij Narain's Case(1) but the law as was understood and applied in the decisions of the High Court of Cochin prior to the Constitution. We have already dealt with the correctness of the view of the High Court on this point. What we are here concerned with is the finding by the learned Judges of the High Court that out of the sum of ₹ 80,000 covered by Exs. A and B a sum of ₹ 59,000 and odd really went in discharge of an antecedent debt and that to that extent, even applying the law as understood in what was formerly British India, the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was circulated to the directors of the plaintiff-bank and the loan asked for was sanctioned by the President of the Bank on June 11, 1945 and the same was passed.by the directors on the same day with a limit up to ₹ 50,000. But this was to be on a mortgage of the Cochin properties. However even before the request for the overdraft was circulated to the directors and their sanction obtained, the officers of the Bank, apparently acting on the instructions of the Secretary gave him loans to the extent of ₹ 45,000. A loan of ₹ 30,000 on a promissory note carrying interest at 6 1/4 % was granted on June 6, 1945 and two days later on a further promissory note ₹ 15,000 was lent. The sum of ₹ 45,000 and interest thereon was carried to the debit of what is termed as a No. 1 account at the Palghat branch of the Bank which was an overdraft account with a limit of ₹ 50,000. It should be noticed that the creation of the mortgage was long after this. Apparently, this overdraft account was opened under the directions of the Bank's head office at Trichur by a letter dated June 18, 1945 (referred to in the opening entry) carrying out the directions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count No. 2 of the, 1st defendant with the Bank at Palghat was opened on October 24, 1945 with a limit of ₹ 30,000. It would be seen that Exs. A B were executed on November 19, 1945 and the deposit of title deeds and the memorandum in connection therewith was also on the same date. Between the 24th October 1945 and the 11th of November the 1st defendant had operated on this No. 2 account both by payment in, as well as by withdrawing from it and as a result of these transactions the amount owed by him to the bank on the 19th November 1945 was a sum of ₹ 59,952/12/5. The position on November 19, 1945 when the loan under Exs. A B was raised and the mortgage Ex. E was executed was therefore this. Under the No. 1 account the 1st defendant owed the Bank ₹ 50,726/15/4. On the No. 2 account the amount due to the Bank was ₹ 59952/12/5. It, was with this state of the account that Exs. A B were executed and the loan of ₹ 80,000 secured by the suit mortgage was raised. This sum of ₹ 80,000 was made available to the 1st defendant, not by the Bank itself adjusting the newly granted loan against the amounts due up to that date and keeping the ₹ 29,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We do not see any substance in this objection, because the respondent is entitled to canvass the correctness of findings against it in order to support the decree that has been passed against the appellant. Coming now to the merits of the controversy, the matter may be viewed thus. We are now concerned with the question whether ₹ 80,000 which were borrowed under Exs. A B and in respect of which a crossed draft for that sum made in favour of the 1st defendant was handed over to him went in discharge of antecedent debts. If the previously existing debt on 14.11.1945 of over ₹ 1,09,000 being the total of the amount due under the No. 1 and 2 accounts was one owed to a third party and that debt had in part been discharged by a demand draft issued on the execution of Exs. A B and the creation of a mortgage by virtue of Ex. E, there could be no doubt that it would be an antecedent debt. That, however, was not the case but the original indebtedness was to the Bank itself and that was discharged by the suit-loan from the Bank. Learned counsel for the appellant laid great stress on the fact that the entirety of the transactions which resulted in the grant of an overdraft faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight be right in saying that the previous loan of ₹ 1,09,000 and odd might have been granted in anticipation of the execution of the mortgage and the final determination of the amount of the overdraft that should be permitted to the 1st defendant but that does not by itself conclude the matter. The learned trial Judge negatived the plea of the respondent that the ₹ 80,000 went in discharge of an antecedent liability to the Bank by reason of the evidence of the Secretary of the Bank in which he stated that this sum of ₹ 80,000 was adjusted towards the earlier debts statement which was repeated by the 1st defendant himself as P.W.3. Learned counsel for the appellant drew our attention to this portion of the evidence and repeated the same arguments. In our opinion, however, this statement or this manner of describing how the draft was utilised does not by itself militate against this loan of ₹ 80,000 discharging an antecedent debt. Factually that the loan of ₹ 80,000 was adjusted by the Bank towards the 1 st defendant's indebtedness is not correct, though it is possible that if the transaction took that form the submission on behalf of the appellant w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f mortgage under Ex. F for, ₹ 80,000. In other words, Ex. E created also a second mortgage on the Cochin properties. On a construction of Ex. J. the High Court held that the 1st mortgage of the Palghat properties was limited to the excess over ₹ 30,000 in the overdraft account It followed from this that the Bank could recover from the Chinese properties that excess and this was found to be, looking into the debits of the account of the 1st defendant, to amount to ₹ 3,792/2/1 The learned Judges of the High Court, therefore, granted in addition to the amounts covered by Exs A and B a decree for ₹ 3792 /211 recoverable from the Cochin properties. In view of the fact that a suit had already been instituted in the Palghat Sub Court for the entirety of the amount due to the extent of ₹ 30,000 and interest due under Ex. C F, the learned judges added in their judgment a reservation which was incorporated in the decree that was drawn up in these terms: If in the suit instituted by the plaintiff in the Palghat Sub-court the plaintiff obtains a decree for the whole amount due under Ex. C and realises the same, the plaintiff will not be entitled to ignore the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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