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Bombay High Court
Ardesir Bejonji Surti vs Syed Sirdar Ali Khan And Ors. on 13 October, 1908
Equivalent citations: 4 Ind Cas 804
Author: Russell
Bench: Chandavarkar, Batchelor


1. This is an appeal from the decree passed by Russell, J., in Suit No. 159 of 1907 brought by the appellant Ardeshir Bejonji Surti, to recover from the first respondent, Syed Sirdar Ali Khan, moneys alleged to have been placed by the third respondent with the first respondent as deposit or security for the due performance of the covenants and conditions of a lease (dated the 3rd of October 1906) of certain premises known as Watson’s Annexe, by the former to the latter for a period of ten years commencing from the 1st of April 1906. The appellant claimed the amount under an assignment dated the 8th of January 1907 from the third respondent, Ruttonji Sorabji Munshi. In the plaint he alleged that the lease had been determined by the first respondent re-entering the premises on the 5th of January 1907, and that on such determination the right accrued to him (the appellant) as the third respondent’s assignee to recover the amount of the deposit less certain sums payable by the third respondent to the first respondent under the terms of the lease.

2. The first respondent in his written statement admitted that there was a lease, that in accordance with it the third respondent had taken possession of the premises, and that he (the first respondent) had re-entered on account of a breach of certain covenants in the lease: but he denied that the covenants and other terms of the lease were all the same as those set out in the plaint, He also denied appellant’s right to recover the deposit on the ground that the third respondent had under the terms of the lease wholly forfeited it.

3. The second respondent opposed the claim on the ground that the third respondent had assigned to him on a date prior to the assignment in favour of the appellant the right to recover the amount of the deposit from the first respondent.

4. It was in this state of the pleadings that the parties went to trial before Russell, J. At the commencement of the trial it was discovered that the lease of the trial it was discovered that the lease of the 3rd of October 1906, relied on both by the appellant and the first respondent, had not been registered,and that, therefore, neither it nor any oral evidence could be received in proof of its terms. Counsel for the appellant sought at the trial to prove those terms by tendering in evidence an agreement for a lease, but Russell, J. disallowed it also upon the ground that it could not be received for want of registration. Evidence was then led on other issues than those relating to the terms of the lease.

Russell, J.

5. Held, inter alia, that the plaintiff (appellant) had not proved the lease and the covenants, and provisions referred to in his plaint, that the third defendant (respondent No. 3) had entered into possession of the premises under the terms of the lease and remained in possession thereof until its determination by the first defendant (respondent No. 1), and that the second respondent had a charge on the deposit prior to that of the appellant. Accordingly the suit was dismissed with costs.

6. The learned Judge’s finding that both the lease and the agreement for a lease referred to in the pleadings of the parties in the Court below required registration has not been impugned before us in appeal. But it is contended for the appellant that the learned Judge ought to have held that the lease having become inadmissible in evidence for want of registration, the contract had become void, and that under Section 65 of the Indian Contract Act the first respondent was bound to restore any advantage he had received under the contract or to make compensation for it to the third respondent. Under Section 2, Clause (g) of the Act, an agreement is said to be “void” when “it is not enforceable by law” that is, when its terms being ascertained have no legal effect at all. That cannot he predicated of an agreement which the law declares has no existence because there is no evidence of its terms. “The mere fact of one party having paid money to another, under a contract which he cannot enforce against the latter, because of its non-compliance with the provisions of the Statute of Frauds, will not entitle the party who has paid such money, to recover the same as on a failure of consideration; for in such a case the contract is not void, but there is merely a deficiency in the evidence thereof.” (1) Further, there is this to be said that not only the Registration Act but also the Transfer of Property Act created a bar in the way of the appellant’s suit as it was launched in the Court below. Section 107 of the latter Act provides that “a lease of immovable property (1) Chitty Junr. on Contracts, page 581, 8th Edition (12th Edition, p. 98) citing Sweet v. Lee, (1841) 3 M. and G. 452. from year to year, or for any term exceeding one year or reserving a yearly rent can be made only by a registered instrument.” And the law is that “if an Act of Parliament says that a contract shall be carried into effect in a given way, and such enactment is not by way of direction merely, then the additional words ‘that shall not be of any effect either in law or in equity’ are superfluous, because if the Act says that is the way all property shall be acquired, you must comply with those provisions, in order to acquire the property–the property is to be given in that mode, and that mode only” Per Wood V.C. in Liverpool Borough Bank v. Turner, (1860) 29 L.J. Ch. 827 830. Accordingly, it has been held by this Court on the construction of the first paragraph of Section 54 of the Transfer of Property Act, which relates to sales of immovable property and the language of which, so far as it is material for our present purpose, is similar to that of Section 107, that there cannot be a sale except by a registered instrument in the class of cases mentioned in the paragraph 28 B. 466; see also a Full Bench ruling of the Madras High Court to the same effect approving of 28 B. 466 in 29 M. 336.

7. It follows then that the appellant could not in support of his claim rely on the lease referred to in his plaint and prove any cause of action alleged to have arisen from it.

8. But although that was so, there was enough in the plaint and also in the written statement to show that, though the lease had not been registered, the parties to it had acted upon its terms, whatever they were, that a certain course of conduct had been pursued by either, which in point of fact constituted the relation of landlord and tenant between them, and that it was in pursuance of that relation that the third respondent had paid certain moneys from time to time to the first respondent as a deposit to secure the performance by the former of the covenants and conditions in the lease. The law applicable to this state of facts is summarized by the Editors of Smith’s Leading Cases Volume I, 10th Edition (pp. 807 and 308), 11th Edition, p. 321 as follows on the authority of the cases there cited, of which the principal is Pulbrook v. Lawes (1876) 1 Q.B.D. 284; 45 L.J.Q.B. 178; 34 L.T. 95:

Although a plaintiff be prevented by the statute from availing himself of his special contract, he may nevertheless be able to recover upon one of the money counts anything in the nature of a debt which has accrued to him by reason of his acting upon the contract.

9. From this point of view it would be open to the plaintiff to give the lease in evidence for the purpose of proving his right to recover the moneys lodged by the third respondent with the first respondent as a debt due from the latter. Such admission of the lease would not contravene the provisions of Registration Act, because it would in that case be put in evidence, not for the purpose of affecting any immovable property, but, to borrow the language of Blackburn, J. in Pulbrook v. Lawes (1876) 1 Q.B.D. 284; 45 L.J.Q.B. 178; 34 L.T. 95, for “a collateral purpose,” i. e. for the purpose of proving a money debt arising from the conduct of the parties See also Thakore Fatesingji v. Bamanji A. Dalal 27 B. 515 at pp. 540 and 541 where Batty, J. has adopted this’ view of the law, relying upon the case of Lalla Gopee Chand v. Saikh Liakut Mossein, 25 W.R. 211. Nor would that view contravene the provisions of Section 107 of the Transfer of Property Act. All that that section enacts is that if parties enter into a transaction by way of a lease of immovable property, it shall have no operation as a lease and shall not constitute the relation of landlord and tenant between the parties in certain cases unless the transaction is embodied in a registered instrument. But the section does not say that if the parties without any such instrument conduct themselves towards each other as if they were landlord and tenant and moneys pass from one to the other in pursuance of that conduct upon the understanding that it would be repaid in a certain event, there shall be no right to recover that money. In such a case the right to recover arises not upon the lease, because according to law no lease exists, but upon an independent equity arising from the parties and founded upon the law of estoppel in Section 115 of the Indian Evidence Act. As was said in Carnish v. Abington (1859) 4 H.N. 549; 28 L.J. Ex. 262; 7 W.R. 504 “If any person by actual expressions, or by a course of conduct, so conducts himself that another may reasonably infer the existence of an agreement or license, and acts upon such inference, whether the former intends that he should do so or not, the party using that language, or who has so conducted himself, cannot after wards gainsay the reasonable inference to be drawn from his words or conduct.

10. This view of the case was not presented at the trial in the Court below, where both. Judge and Council thought that the appellant’s case had an insuperable difficulty to meet on account of the non-registration of the lease and that there was the authority of no decided case in point which could be invoked in order to establish his right to recover the moneys in dispute. Having regard to the law which we have stated at Some length, above, it would become necessary to allow the appellant to amend his plaint and prove the case so stated unless the decree of the Court below should be confirmed upon the ground that he has no right to recover the moneys in dispute from the first respondent, because, as held by Russell, J., the second respondent has a prior and superior right to them.

11. The second respondent claims the right to those moneys under a transfer to him by one Jakeria of an assignment from the third respondent. The facts in that connection are that, in consideration of Jakeria agreeing to renew hundis drawn by the third respondent in the event of non-payment thereof by the latter on their due dates, the third respondent gave on the 23rd of July 1906 “a lien or charge” to Jakeria on the moneys that might be recoverable from the first respondent by the third respondent out of the amount of the deposit now in dispute (see Exhibit 14). Jakeria at the instance of third respondent assigned that lien to the second respondent by means of an endorsement (Exhibit 14 A) made on Exhibit 14. The endorsement bears no date, but Russell, J. has found on the evidence that it was made on the 26th of October 1906. The correctness of that finding has not been challenged before us; indeed Mr. Robertson for the appellant candidly admitted that he could not question it. On those facts then it is quite clear that the second respondent has a prior and superior right to the moneys in dispute which are in the hands of the first respondent.

12. But it is contended for the appellant that what the second respondent relies upon as the basis of his claim is not an assignment of the. third respondent’s right to recover the moneys from the first respondent but merely a lien or charge of those moneys, subject to a contingency which never occurred.

13. Now, it is true that by Exhibit No. 14 the third respondent gave to Jakeria what he calls a lien on the amount of Rs. 18,566 deposited by him to the first respondent and that by Exhibit No. 14 A Jakeria, or rather his authorised agent, Elias Buddha, purported to transfer that “charge” or “lien” to the Second respondent. But the mere fact that the parties have described ‘the transaction in each case as “a lien” on “charge” cannot deprive it of its real nature, if “in substance the transaction was in the first instance an assignment by the third respondent to Jakeria of the right of the former to recover his moneys in the hands of the first respondent, and, in the second instance, a transfer of that assignment by Jakeria to the second respondent. The English cases cited before us as making a distinction between a charge and an assignment have no bearing on the question here, which must be decided solely with reference to the intention and conduct of the parties disclosed in the evidence and the provisions of the Transfer of Property Act. The transactions evidenced by Exhibit 14 and Exhibit 14 A are substantially transfers of “an actionable claim” dealt with in Chapter VIII of that Act. Where a creditor purports to create a lien or charge on the debt due to him in favour of another person, the words lien or charge have no meaning except as giving the latter a right to recover the debt from the debtor. The transaction is in reality one whereby the owner of what in English law is called a chose in action transfers it to another. And that is what the evidence in this case establishes to have been the intention of the parties to Exhibits 14 and 14 A.

14. But it was said that, even assuming that Exhibit 14 was in substance an assignment of the third respondent’s right to recover the moneys in the hands of the first respondent, its operation as such depended upon the former renewing the hundis of the latter to the extent of Rs. 15,000 and that only in the event of failure by the latter to pay the amount of such hundis on their respective due dates; that the hundis in question having been satisfied by the third respondent on their due dates, the contingency, on the happening of which alone the assignment was to take effect, having never occurred, the assignment had no operation. This argument assumes a state of things which is not supported by the evidence in the case. According to the third respondent, three hundis (Exhibit T.) having become due in July 1906, he requested Jakeria’s authorised agent Elias (also called Buddha) to renew them, because the third respondent was unable then to satisfy the hundis by payment in cash. Elias Buddha wanted some security besides the endorsements on the hundis before he could agree to renew. And it was on that account that the third respondent executed the document, Exhibit 14, with the result that Elias Buddha on its execution renewed the hundis. This version of the transaction finds substantial corroboration from the evidence of the appellant himself. He says that he knew that a letter (that is Exhibit 14) had been given by the third respondent to Jakeria on the 23rd of July 1906; that he himself might have prepared the draft of it; and that Jakeria renewed the hundis after he had got his letter of assignment.

15. It only remains to notice one further argument of appellant’s counsel. It is argued that when Jakeria was paid off, his assignment came to an end and that there was no right existing in virtue of Exhibit 14 which he could transfer to the second respondent. There, again, we must look into the evidence to see what really happened. The moneys which went to satisfy the third respondent’s liability to Jakeria came from the pockets of the second respondent. The second respondent supplied the third respondent with those moneys on the distinct understanding that he was to step into the shoes of Jakeria. Accordingly Jakeria through his agent Elias Buddha transferred his right under Exhibit 14 by Exhibit 14 A to the second respondent. These are the facts found by Russell, J., and the evidence, which he has rightly believed, supports them.

16. On the ground, therefore, that the second respondent’s assignment, being prior in in point of time to the appellant’s, defeats the latter, we must confirm the decree of Russell, J., with costs. It was not suggested in the Court below nor has it been suggested in appeal that, after satisfying the second respondent’s claim, there would be a balance of the deposit left in the hands of the first respondent to which the appellant would be entitled in virtue of his assignment. Before us,’as it has been before Russell, J., the appellant’s case was fought out on the footing that if the second respondent’s assignment was found to be prior in point of time to the appellant’s the latter must fail in the Suit.

17. After the delivery of this judgment Mr. Robertson urges with reference to the last sentence that there would be a balance left, that on that ground his client had asked Russell, J. for an order for an account to be taken and to marshal the securities in the hands of the second respondent. Nothing was said about this during the hearing of the appeal before us. In Russell, J.’s judgment it is distinctly stated that it was admitted before him that if the second respondent’s claim was prior he (the appellant) would get nothing. The correctness of that statement in the judgment was not at all assailed before us. And the appellant’s deposition (page 82 of the paper book in appeal) confirms Russell, J.’s remark as to the admission. We cannot in this state of the pleadings allow the case to be re-opened, because that would be encouraging parties to argue their cases piecemeal and shift their grounds of claim so as to prolong litigation. Respondents to have separate sets of costs.

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