TMI Blog2006 (11) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... suit aggrieved by a letter / order dated 01.11.2003 issued to the petitioner by the respondent Corporation under Section 29 of the State Financial Corporation Act, 1951 (hereinafter to be referred to as, 'the SFC Act'). In terms of the said notice / order, the suit property was sought to be attached on the ground that the petitioner had mortgaged the said property with the respondent Corporation as collateral security. 2. It is important to note that the petitioner does not dispute his signatures on the documents and, in fact, states that the contract of mortgage was got signed by the petitioner on 10.03.1997 by misrepresenting and concealing material facts. The mortgage was created much after the date of sanction and disbursement of the loan in favor of the borrower without any further facility being advanced at that stage. The mortgage was, thus, alleged to be null and void for lack of consideration. The plaint alleged that the consideration to a contract can be passed only once and, thus, the additional guarantee cannot be legally claimed and enforced in law unless fresh consideration is given, which was not so in the present case. There was absence of any reciprocal pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 17 of the Registration Act, 1908 being a non-testamentary instrument creating an interest in the immovable property. Thus, in such a case, if the document is not registered, it cannot be used in evidence at all. In the given facts of the case, it was found that the document in question dated 10.03.1997 was a memorandum of entry for creation of equitable mortgage. It was only a memorandum about the transaction having taken place on that date and records that the petitioner had delivered and deposited the title deeds with the respondent Corporation with the intent to create security by way of equitable mortgage. It was held that this document was only a memorandum and not a contract to create mortgage as the mortgage had already been created by deposit of title deeds. This document was not in isolation, but there was another letter of the even date addressed by the petitioner to the respondent Corporation confirming having deposited the title deeds of the property in question for the term loan of Rs. 64 lakhs to the borrower. The respondent Corporation even filed communications between the parties to show how the document was understood by both the parties. 7. Learned Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Indian Contract Act, 1872 (hereinafter to be referred to as, 'the Contract Act'), which reads as under: 127. Consideration for guarantee. - Anything done, or any promise made, for the benefit of the principal debtor, may be a sufficient consideration to the surety for giving the guarantee. Illustrations (a) B requests A to sell and deliver to him goods on credit. A agrees to do so, provided C will guarantee the payment of the price of the goods. C promises to guarantee the payment in consideration of A's promise to deliver the goods. This is a sufficient consideration for C's promise. (b) A sells and delivers goods to B. C afterwards requests A to forbear to sue. B for the debt for a year, and promises that, if he does so, C will pay for them in default of payment by B. A agrees to forbear as requested. This is a sufficient consideration for C's promise. (c) A sells and delivers goods to B.A afterwards, without consideration, agrees to pay for them in default of B. The agreement is void. 11. Learned Counsel submits that the present case would be covered by illustration (c) and, thus, the agreement would be void as the mortgage is after disbursement of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rincipal debtor. The nature of the things done which constitutes such consideration can be gleaned from some decided cases to which reference has been made by the learned Counsel for the parties. (9) In Nanak Ram v. Mehin Lal 1 All 487 where N. advanced money to K. on a bond hypothecating K.'s property, and mentioning M. as surety for any balance that might remain due after realization of K.'s property, M. being no party to K.'s bond but having signed a separate surety-bond two days subsequent to the advance of the money, it was held that the subsequent surety bond was void for want of consideration under Section 127 of the Indian Contract Act. ... (14) A reference to illustration (c) of Section 127 of the Indian Contract Act may be made. It reads: A. sells and delivers goods to B. C. afterwards without consideration, agrees to pay for them in default of B. The agreement is void. From this illustration, I feel fortified in my conclusion that anything done or any promise made for the benefit of the principal debtor must be contemporaneous to the surety's contract of guarantee in order to constitute consideration therefore. A contract of guarantee executed afterwards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken into the creditor's service or employment. 21. Learned Counsel also referred to the judgment in Syros Shipping Co SA v. Elaghill Trading Co (1981) 3 All ER 189 to advance the plea that there has to be an independent cause of action and a party cannot sue on a naked promise to pay. Thus, equitable estoppel cannot be used as a sword, but only as a shield. The necessity of consideration is an essential part of the cause of action and, thus, the doctrine of consideration is too firmly fixed to be overthrown by a side-wind. Such doctrine of consideration was held to remain a cardinal necessity of the formation of a contract, although not of its modification or discharge. 22. All the aforesaid judgments, as is obvious, are on the principle of the requirement of consideration. There is no quarrel with the proposition of law, but as held above, the consideration is the forbearance to sue itself and, thus, it cannot be said that the subsequent execution of security by the petitioner is without consideration. 23. The petitioner also referred to judgment of the Division Bench of this Court in Ishwar Dass Malhotra v. Dhanwant Singh and Ors. AIR1985Delhi83 , which discussed the law rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual agreement, in writing, which is made an integral part of the transaction and is itself an operative instrument and not merely evidential, such a document must under the statute be registered. 26. The legal position has been elucidated in the aforesaid judgments. In each case, the document in question has been considered and analysed and a conclusion arrived at on the issue of registration one way or the other on the consideration of the document. In the present case ,the document has been construed as being only evidence of deposit of the title documents and, thus, would not require registration. 27. It is apparent that the petitioner having mortgaged the property to secure forbearance to sue against the borrower is trying to defeat the rights of the respondent Corporation conferred under the statute being the SFC Act and this cannot be permissible. 28. In the end, it must be observed that the observations made by the courts below and by this Court are naturally only prima facie in nature since the matter in issue relates to the decision on interlocutory applications and will not influence the decision in the main suit. 29. The petition and the application are accordingly di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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