PETITIONER: VRIDDHACHALAM PILLAI Vs. RESPONDENT: CHALDEAN SYRIAN BANK LTD., ANANOTHER DATE OF JUDGMENT: 03/12/1963 BENCH: AYYANGAR, N. RAJAGOPALA BENCH: AYYANGAR, N. RAJAGOPALA GAJENDRAGADKAR, P.B. SUBBARAO, K. WANCHOO, K.N. CITATION: 1964 AIR 1425 1964 SCR (5) 647 CITATOR INFO : R 1978 SC1791 (13) ACT: Hindu Law-Partition-If bonafide-Onus of proof-Father's debt--Liability of joint family property for antecedent debt-Personal law and lex situs-Which applicable ? HEADNOTE: Kalayanasundaram and the members of his family were per- manent residents of Palghat in the then State of Madras. and his son, the appellant, formed members of an undivided Hind family. The family had properties not only in Palghat but also in Cochin. In 1945, Kalayanasundaram entered into many contracts with the Government of India for the supply of black pepper As he had no ready money to implement those contracts, he app- roached the Respondent Bank for funds to finance those contract For that purpose, he executed three promissory notes in favour the bank for a total sum of Rs. 1,10,000. He also deposited title deeds of his properties with the Bank as security. As Kalayanasudaram did not pay the borrowed amount, the Bank filed a suit against him on June 17, 1948. But even before that date, a deed of partition was executed on June 3, 1948 between Kalayanasundaram a the appellant, his son, by which the properties of the family in the Cochin State were divided into two equal parts, the father taking over himself the liability to pay the amount due to the Bank. It was stated in the deed of partition that the debt due to the bank was a personal debt of the father and hence was not binding on the son. To the mortgage suit filed by the Bank, several defences we raised. However, the trial court decreed the suit against the father and there was no appeal against that. Against the decision of the trial Judge that the Bank had no right to obtain a mortgage decree against the appellant and his half share in the family property an appeal was filed by the Bank which was accepted by the High Court which modified the decree by passing a mortgage decree against the appellant qua his share as well. The appellant came to this court in appeal after obtaining a certificate of fitness. The contentions raised by the appellant in this Court were th the finding of 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 648 erroneous reasoning, that the High Court 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 and that the High Court erred in holding that the mortgage evidenced by Ex. 'E' was to any extent I for the discharge of antecedent debts. Dismissing the appeals, Held: (i) The finding of the High Court that the partition of family properties effected between the appellant and his father was not bona-fide, was correct. The partition deed did not set apart sufficient property for the share of the father to enable him to discharge all his debts. Moreover, onus should have been placed on the ap- pellant to establish that the nature of the arrangement under the partition was such as made proper and adequate provision for the discharge of the debt, but actually the onus was wrongly placed on the Bank. (ii) The view of the High Court that when the transactions took place, British India and Cochin State were independent sovereign states and according to Private International Law, it was the law of the situs of the property that should govern the contracts relating to it, was not correct. The rule was not any statutory law which was binding on parties who had dealings in regard to land in that State. Taking the Cochin State itself, the power of a person to dispose of property or to encumber it depends upon whether he is a Hindu, Muslim or Christian and in each case the right of the owner to dispose of the property depends upon his personal law as modified by any statute applicable to that community to which he belongs. There is no situs which can be applied irrespective of the personal law governing the owner. In the present case, Kalayanasundaram and his family were permanent residents of Palghat. The law applicable was the law laid down by the Privy Council and accepted by the Full Bench decisions of the Madras High Court and finally laid down by the Supreme Court. When the Bank dealt with Kalayanasundaram, it must be taken to have contracted with him on the basis of such a law being applicable to the transaction. (iii) There was a real and factual antecedency between the loan of Rs. 80,000 for which the draft was given on November 16, 1945, and the previously existing indebtedness of Rs. 1,09,000, and odd in the over drafts account No. 1 and 2 of Kalayanasundaram to the Bank which was discharged thereby. 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 proceedings upon a decree for the payment of debt. The father can, so long as the family continues undivided, alienate the entirety of the family property for the discharge of his antece- 649 dent personal debts subject to their not being illegal or immoral. In other words, the power of the father to alienate for satisfying his debts is co-extensive with the right of the creditors to obtain satisfaction out of family property including the share of the sons in such property. Where a father purports to burden the estate by a mortgage for purposes not necessary and beneficial to the family, the mortgage qua mortgage would not be binding on the sons unless the same was for the discharge of an antecedent debt. Where there is no antecedency, a mortgage by the father would stand in the same position as an out and out sale by the father of family property for a purpose not binding on the family under which he receives the sale price which is utilised for his personal needs. After the joint status of the family is disrupted by a partition, the father has no right to deal with the family property by sale or mortgage even to discharge an antecedent debt, nor is the son under any legal or moral obligation to discharge the post-parti- tion debt of the father. Antecedent debt in this context means a debt antecedent in fact as well as in time. The debt must be truly independent and not part of the mortgage which is impeached. The prior debt must be independent of the debt for which the mortgage is created and the two transactions must be dissociated in fact so that they cannot be regarded as part of the same transaction. Brij Narain v. Mangal Prasad, 51 I.A. 129, Panna Lal v. Mst. Naraini, [1952] S.C.R. 544, Chidambara Mudaliar v. Rootha Perumal, I.L.R. 27 Mad. 326 and Vankataramayya v. Vankataramana, 29 Mad. 200, referred to. JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No.547 of 1961.
Appeal from the judgment and decree dated October 16, 1956
of the Kerala High Court in Appeal Suit No. 135 of 1953.
T.N. Subramania lyer, M.S. Narasimhan and M.S. Sastri, for
the appellant.
A.V. Viswanatha sastri, T.S. Venkateswara Iyer, K. Jayaram
and R. Ganapathy Iyer, for respondent No. 1.
December 3, 1963. The Judgment of the Court was delivered
by
AYYANGAR J.-This appeal is directed against the judgment of
the High Court of Kerala and has been filed on the strength
of a certificate of fitness
650
granted by the High Court under Art. 133(1)(a) of the
Constitution.
The appeal arises out of a suit filed by the respondent-The
Chaldean Syrian Bank Ltd.-which for shortness we shall refer
to as the Bank, for the recovery of certain sums due on a
mortgage by deposit of title deeds executed by
Kalayanasundaram Pillai-the appellant’s father who was
impleaded as the 1st defendant and is now the 2nd respondent
before us.
The mortgage on which the Bank laid this suit was evidenced
by Ex. ‘E’-a memorandum recording the 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
Rs. 50,000 and Rs. 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 and his half share in the family
property, but on appeal by the Bank, the learned Judges
allowed the appeal and modified the decree by passing a
mortgage decree against the appellant qua his share as well.
It is the correctness of this variation that is questioned
in this appeal.
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The execution of the promissory notes and the receipt of
consideration therefore as recited therein were admitted by
the 1st defendant, as also the creation of the security by
the deposit of the title deeds of properties and whatever
contentions were raised in respect of these matters on
behalf of the appellant have now been abandoned. Some point
was made on behalf of the appellant regarding the suit debt
being avyavaharika, but this also has been found against and
given up. The only question that survives is whether the
mortgage evidenced by Ex. ‘E’ is binding on the appellant.
Here again it is now common ground, that the debt was a
personal borrowing by the father, not for any purpose
binding on the joint family.
A few more facts have to be stated in order that the precise
range of the controversy in this appeal might be properly
understood. That Kalyanasundaram and the members of his
family were permanent residents of Palghat in the then State
of Madras that he with the appellant formed members of an
undivided Hindu family and that the properties which were
the subject of the mortgage were joint family properties,
none of these were in dispute The family possessed
properties not merely in Cochin but also in Palghat.
We shall now proceed to detail the circumstances in which
the borrowings which has given rise to this litigation were
made. In or about May 1945 Kalyanasundaram entered into a
contract with the Government of India for the supply of 100
tons of black pepper and also into further contracts of the
same type later in the year. He had apparently no ready
cash to implement these contracts and approached the Bank
for funds for financing the undertaking. For this purpose
he executed three promissory notes in favour of the Bank for
a total of Rs. 1,10,000. The promissory notes marked
Exhibits A and B for Rs. 50,000 and Rs. 30,000 respectively
already referred to, were executed on November 14, 1945 and
the debt evidenced by them was secured by a mortgage by
deposit of
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title-deeds of properties in the Cochin State and this is
the subject-matter of the 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 Rs. 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 pauperis was filed in the
court of the Subordinate Judge at Palghat on behalf of the
appellant by his uncle as his next friend. To that suit
were impleaded as defendants Kalyanasundaram, the father, as
well as the mother and as many as 31 other creditors of
Kalyanasundaram including the respondent Bank. The relief
sought in the suit was the effecting of a Partition of the
family properties situated in Palghat and for the delivery
of the half-share therein to the minor plaintiff. With this
was coupled a prayer for the setting aside of certain
decrees which had been obtained by certain of the creditors
who were impleaded as defendants, on the ground either that
the promissory notes or other documents on which the decrees
had been passed were not supported by consideration, or that
these debts were tainted with illegality or immorality, the
allegation being that
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the father was leading a reckless and immoral life and was
addicted to women. So far as the debt due to the Bank was
concerned, the allegation was, though not expressed very
clearly, that it was a borrowing for a personal business
newly started by the father and would not, therefore, bind
the minor’s share in the family properties. As already
stated, the relief for partition in that suit was confined
to the properties at Palghat in Madras. While this appli-
cation for leave to sue in forma pauperis was pending a
notice was issued on May 27, 1948 through a lawyer
purporting to act on behalf of the appellant, addressed to
his father, in which the partition of the properties of the
family situated in the Cochin State was demanded This notice
was followed, by a deed of partition dated June 3, 1948 by
which the properties of the family in the Cochin State were
purported to be divided into two equal parts, the father
being directed to pay the debts borrowed by him out of the
share allotted to him, the deed reciting an agreement with
the father that the minor should be free from any obligation
discharge those debts. The debt due to the Bank which is
the subject of the present proceedings, was among those the
discharge of which the father under took under this deed
marked as Ex. VI. The deed recited that this debt was a
personal debt of the father and was therefore not binding on
the son and this was assigned as the reason for the
provision made for its discharge by the father without any
obligation being laid 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
654
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 it was easily found against.
Issue no 2 ran:
“Whether the trade mentioned in the plaint was
a new trade started by the 1st defendant or an
ancestral trade and are not the debts
contracted by the father-the 1st defendant-for
purposes of the trade binding on defendant no.
2 even if the said trade be not ancestral?”
This issue, at least the first part of it has been found in
favour of the appellant that the trade viz., the supply of
black pepper to the Government was a new trade started by
the 1st defendant and was not an ancestral trade and that
finding has not been disturbed by the High Court and being a
concurrent finding on a question of fact was not naturally
challenged before us. Closely related to this is issue no.
14 which ran:
“Are the debts sued on incurred for family
necessity and binding upon the 2nd defendant?”
The learned trial Judge recorded a finding that the debts
sued on were not incurred for family necessity nor for the
benefit of the family. These findings also which were not
varied by the High Court were not questioned before us.
Incidentally it should be mentioned that the learned trial
Judge found, when dealing with issue no. 9 which was a
general issue relating
655
to the binding character of the debt on the appellant, that
the mortgage was not for securing an antecedent debt, but
this finding was reversed by the High Court, the learned
Judges holding that to the extent of Rs. 59,000 the mortgage
loan went in discharge of antecedent debts and we shall have
occasion to deal with this matter in detail later in this
judgment.
The 13th issue ran:
“Is the partition set.up by the defendants
true and bona fide and binding upon the
family?”
This was answered in the affirmative and in favour of the
appellant by the learned trial Judge but that finding has
been reversed and the partition has been found not to be
bona fide by the High Court and that is one of the points in
controversy in the appeal before us. Issue no. 1 0 was in
these terms:
“Are the Defendants Cochin domiciles? Are
they not governed by the law of the Indian
Union being permanent residents of the Indian
Union?”
An issue in this form arose because of the different views
entertained of the Hindu law as regards the scope of the
pious obligation of a son to discharge the debts of the
father which are not illegal or immoral. In the view of
Hindu lawyers the 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
656
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 proceedings upon a
decree for the payment of that debt.
(2) The father can, so long as the family continues
undivided alienate the entirety of the family property for
the discharge of his antecedent personal debts subject to
their not being illegal or immoral.
In other words, the power of the father to alienate for
satisfying his debts, is co-extensive with the right of the
creditors to obtain satisfaction out of family property
including the share of the sons in such property.
(3) Where a father purports to burden the estate by a
mortgage for purposes not necessary and beneficial to the
family, the mortgage qua mortgage would not be binding on
the sons unless the same was for the discharge of an
antecedent debt. Where there is no antecedency, a mortgage
by the father would stand in the same position as an out and
out sale by the father of family property for a purpose not
binding on the family under which he receives the sale price
which is utilised for his personal needs.
It need hardly be added that after the joint status of the
family is disrupted by a partition, the father has. no right
to deal with the family property by sale or mortgage even to
discharge an antecedent debt, nor is the son under any legal
or moral obligation to discharge the post-partition debts of
the father.
(4) Antecedent debt in this context means a debt antecedent
in fact as well as in time, i.e., the
657
debt must be truly independent and not part of the mortgage
which is impeached. In other words, the prior debt must be
independent of the debt for which the mortgage is created
and the two transactions must be dissociated in fact so that
they cannot be regarded as part of the same transaction.
The latest of the rulings of the Privy Council in which the
law as stated above was expounded is reported, as Brij
Narain v. Mangla Prasad(1) and this Court in Panna Lal ‘I v.
Mst. Naraini(2) has expressly approved and adopted the
same.
in Cochin and Travancore, however, the law was understood
somewhat differently. Both the High Courts of Cochin and
Travancore when these States were under princely rule, held,
following what they considered as the logical result of
certain earlier decisions of the Privy Council, that a
mortgage executed by a father, notwithstanding that the debt
secured thereby be not incurred for family necessity or
benefit but were purely personal, 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(4) 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.
(1) 51 I.A. 129.
(3) I.L.R. 27 Mad. 326.
(2) [1952] S.C.R. 544
(4) I.L.R. 29 Mad 200.
1/SCI/64-42
658
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 for the’ ascertainment of the
particular law which applied; the place of domicile of the
family would have relevance.
The learned Subordinate Judge found that the family of the
father- 1st defendant-was a resident of and domiciled in
Palghat and that therefore would not be governed by the rule
of Hindu law as understood and applied by the High Courts of
Travancore and Cochin. The learned Judges of the High Court
while affirming the finding that the defendants were domi-
ciled in and residents of Palghat and were not even
residents of Cochin, were still of the opinion that as the
properties which were the subject of the mortgage were in
Cochin, the Cochin view’ of the Hindu law was applicable to
determine the rights of the parties on the basis of that
interpretation of the law- being the lex situs and applying
that law came to the conclusion that eve a if the
mortgage–Ex. ‘E’ was concurrent with and part of the same
transaction as the debts which it secured, the mortgage was
binding on the appellant’s share in the family property. It
was on this line of reasoning that the learned Judges held-
that even though of the mortgage debt under Ex. ‘E, only
Rs. 59,000 was found by them as having been utilised for
discharging the antecedent debts of the father, still the
Bank was entitled to a mortgage decree against the share of
the appellant to the extent of the entire mortgage money.
This was one of the points which was canvassed before us,
which. we shall deal with in its proper place.
Pausing here and before setting out the points urged before
us by the appellant, there is one matter that has to be
mentioned merely for the purpose of clarification. As
already stated, the suit as originally
(1) 51 1. A. 129.
659
filed was for the recovery of the debt due under all the
three promissory notes-Exs. A, B & C and the interest
accrued thereon which totalled over Rs. 1,27,000 though the
property against which the mortgage decree was sought was
confined to the Cochin property which was covered by the
memorandum of deposit-Ex. E. The learned Sub-Judge,
however, held that the suit in so for as the debt under the
pronote Ex. C. for which properties in Palghat were given
as security could not be sued for in his Court and
disallowed the Bank’s claim to that extent. That portion of
the decree has become final and was not challenged by the
Bank on appeal. It might 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 nature of the partition which
was evidenced by the registered instrument marked Ex. VI-
whether it was such as could be termed bona fide and
satisfied the
660
requirements of a partition which would preclude the
creditor of the father from having recourse to the share of
the family property in the hands of the son.
Before we deal with the facts relevant to that matter we
consider it would be convenient to focus attention on the
real points for determination in that context and for that
purpose we shall extract a passage from the judgment of this
Court in Pannalal v. Mst. Naraini(1) where this is dealt
with. Mukherjea, J. explained the law on the point in these
terms:
“The sons are liable to pay these debts even
after partition unless there was an
arrangement for payment of these debts at the
time when the partition took
place……………… The question now comes
as to what is meant by an arrangement for
payment of debts. The expressions ‘bona fide’
and ‘mala fide’ partition seem to have been
frequently used in this connection in various
decided cases. The use of such expressions
far from being useful does not unoften lead to
error and confusion. If by mala fide
partition
is meant a partition the object of which is to
delay and defeat the crediditors who have
claims upon the joint family property,
obviously this would be a fraudulent
transaction not binding in law and it would be
open to the creditors to avoid it by appro-
priate means. So also a mere colourable
partition not meant to operate between the
parties can be ignored and the creditor can
enforce his remedies as if the parties still
continued to be joint. But a partition need
not be mala fide in the sense that the
dominant intention of the parties was to
defeat the claims of the creditors; if it
makes no arrangement or provision for the
payment of the just debts payable out of the
joint family property, the liability of the
sons for payment of the pre-partition debts of
the father will still
remain ……………….. An arrangement for
payment of debts does not necessarily imply
(1). [1952] S.C.R. 544.
661
that a separate fund should be set apart for
payment of these debts before the net assets
are divided,, or that some additional property
must be given to the father over and above his
legitimate share sufficient to meet the
demands of his creditors. Whether there is a
proper arrangement for payment 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………… Thus, in
our opinion, a son is liable, even after
partition for the pre-partition debts of his
father which are not immoral or illegal and
for the payment of which no arrangement was
made at the date of the partition.”
There are one or two observations which it is necessary to
make before applying the law as here laid down to the facts
of the present case. In the
662
first place we are here concerned primarily with the rights
of the Bank as a secured creditor to proceed against the
security, ignoring the partition. To such a situation the
law as explained in the judgment in Pannalal’s case (1)
would not have immediate relevance, for Mukherjea J. was
dealing with the rights of an unsecured creditor of the
father to proceed against the shares of the sons after a
partition. In other words, the nature and bona fides of the
partition and the right of the creditor to proceed against
the share allotted to the son in such partition would arise
for consideration only if the Bank were unable to establish
that the mortgage was as such not binding on the son. This
was the situation of the Bank when the learned trial Judge
found that the mortgage was not binding on the appellant’s
share in the family property. If, however, the mortgage
were binding on the son either because it was created to
raise money for purposes binding on the family as necessary
or beneficial there for or was executed in order to
discharge an antecedent debt of the father, the bona fides
of the partition and the allotment of property to the sons
cannot affect the rights of the secured creditor to proceed
against the properties allotted to the son which are the
subject of mortgage. In the present appeal, in view of the
conclusion we have reached, for reasons which we shall
discuss later in the judgment, that the mortgage under Ex.
‘E’ was for securing the repayment of an antecedent debt,
the bona fides of the partition would not have a crucial
significance. Since however the question of the reality or
the binding nature of the partition would arise in the event
of the mortgaged, property being found in sufficient to dis-
charge the decree and the creditor or the decree holder
thereafter seeks to proceed against properties allotted to
the share of the appellant which were not included in the
mortgage, we have thought it necessary and proper to examine
it.
Proceeding then to deal with the matter, we must first
observe that the onus of proving that
(1) [1952] S.C.R. 544.
663
the partition arrangement is fair and bonafide in the sense
explained by this Court in Panna Lal’s case(,,) 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 fulfils certain conditions. From this it would
seem to follow logically that the onus would be upon the son
to establish that the nature of the arrangement under the
partition was such, as made proper and adequate provision
for the discharge of the debt, for that is the basis upon
which his own discharge from liability depends. The learned
trial Judge framed an issue regarding the partition being
fair and bona fides and binding on the Bank but the entire
discussion on the facts relating to it proceeded on the
footing that the onus was upon the Bank to establish that
the partition was mala fide.
The,next error of the learned trial Judge lay in ignoring
the circumstance that the partition did not make provision
for the discharge of the entirety of the debts of the
father, nor did it take into account, all the properties of
the family. The partition was evidenced by a registered
instrument dated June 3, 1948 The first feature of this deed
is that though the,
(1) [1952] S.C.R. 544.
664
family had properties both at Palghat in the then State of
Madras, as well as in the Cochin State, the partition deed
which has been marked as Ex. VI dealt only with the
properties in Cochin. These properties were divided into
two parts which were stated to be equal in value and they
were allotted respectively to the father and the minor son.
It contained a recital that the father acknowledged that the
debts incurred by him were for his own personal purposes and
were not binding on the son and that as a consequence of
this state of affairs the debt due to the Bank was directed
to be discharged by the father-a direction to which he
expressed his agreement. The learned trial Judge found that
the total property at Cochin was fetching an income of about
18 to 19 thousand rupees a year and computing the market
value of the property on that basis considered that it. made
ample provision for the discharge of the debt due to the
Bank. But he paid no attention to the fact that besides the
debts for the discharge of which provision was made in Ex.
VI, the father had incurred several debts to creditors in
Palghat and which the son was under a pious obligation to
reply but to this we shall revert after setting out the
grounds on which the learned Judges of the High Court based
-their finding.
As stated earlier, the learned Judges of the High Court
reversed the finding of the learned trial Judge on this
point. Briefly 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,
665
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 was thus a repudiation of liability on the
part of the son and the learned Judges held that such a
repudiation would by itself negative the partition being
bona fide and binding on the creditor. Learned counsel for
the appellant submitted that of the two reasons assigned by
the learned Judges for their conclusion that the partition
was not bonafide the first was insufficient and the second
irrelevant and immaterial. As regards the first ground, he
urged that at the most, it would occasion greater scrutiny
and provided that, as found by the learned trial Judge, the
properties allotted to the share of the father were fairly
sufficient for the discharge of the debts binding on the
son, the circumstances relied on would not per se render the
arrangement mala fide. Regarding the 2nd ground, he pointed
out that the fact that the father took over the liability
for the reason that the debt was not binding on the son, was
a matter of legitimate arrangement inter se between the
coparceners and would have no bearing on the fairness or
bona fides of the partition with was concerned really with
ascertaining whether the property set apart for the father
was or was not sufficient for the discharge of the
indebtedness which he undertook. We see considerable force
in the submission of the learned counsel., particularly was
the criticism of the second of the above reasons The recital
as to the character of the debt as against the son is a
recital in a document to which the father and the son- are
parties and if between them the son repudiates the debt as
binding on him, that is no reason by itself for holding the
partition to be mala fide.
666
We agree that the real question for consideration in such
cases is whether sufficient property has been set apart for
the share of the father to enable him to discharge the debts
which he has undertaken to discharge. Examined from this
point of view we are ,,clearly of the opinion that the
partition deed-Ex. VI does not satisfy this test. In the
first place, we agree with the learned Counsel for the
respondent in his criticism that the learned trial Judge had
really no basis in the evidence for recording his finding
;is regards the income from the property. That finding was
based not on any evidence adduced directed to that point but
by taking into account certain statements made to the Bank
by Kalyanasundaram at the time the loan was raised. 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 Rs. 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 Rs.
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 Rs.
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 suggested that for
considering the bona fides of the partition under Ex. VI
only the debts incurred in Cochin and
667
on which suits could be laid in Cochin should be considered
but this is obviously incorrect because even assuming that
in regard to each one of those debts, a suit could not be
instituted in the Courts in the Cochin State, undoubtedly
the decrees obtained in the Madras State could be
transferred for execution to Cochin and vice versa. In
these circumstances, unless the entirety of the debts
payable by the father were taken into account and sufficient
and adequate provision made for the discharge of these debts
from and out of the share allotted to the father-either his
original share or any added assets to enable him to do so
-the partition cannot be held to be bona fide within the
meaning of the decisions. We therefore agree with the High
Court, though not for the same reasons, in its finding that
the partition under Ex. VT is not such as to be binding
against the Bank.
We shall next deal with the second point which relates to
the reasoning on the strength of which the learned Judges of
the High Court granted a decree to the bank for the entire
sum of Rs. 80,000 and odd covered by the two promissory
notes ‘A’ & ‘B’ notwithstanding their finding that only Rs.
50,000 and odd out of the loan of Rs. 80,000 went towards
the discharge of antecedent debts. We should add that we
are reserving for later consideration the correctness of the
grounds for holding that to the extent of Rs. 59,000 the
mortgage was for discharge of antecedent debts which is the
subject matter of the third of the points raised by the
Appellant.
Their reasoning may be set out in their own words:
“When the plaint transactions took place
British India and Cochin State were
independent sovereign states and according to
Private International law it is the law of the
situs of the property that should govern
contracts relating to it.”
On this principle they applied the Hindu Law as administered
in Cochin State to determine the rights of the creditor and
under, that law even a mortgage, which was contemporaneous
with the debt would
668
be binding on the sons, provided the same was not illegal or
immoral, though the debt was not for a purpose binding on
the family either by way of necessity or benefit. On this
basis they held that the bank was entitled to a mortgage
decree for the entire sum even though Rs. 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 owner. By way of example, let us
take the case of a testamentary power of disposition over
immovable property in that State. If the owner were a
Christian he might be entitled to dispose of property to the
full extent. If he were a Muslim, there would be a limi-
tation on such a power based upon the rules of Muslim Law
applicable to him subject, of course, to any statutory
modifications thereof. In the case of a Hindu, his power to
dispose of by will would depend upon whether the property
was self-acquired or joint and whether he was a member of a
Joint Hindu Fami the existence of coparceners and the like.
The Cochin law itself, therefore, recognised that Hindu Law
was a Personal Law and that the rights of dealing with
property flowed from the Personal
669
Law of the owner. It is hardly necessary to cite authority
for the position that Hindu Law is a Personal Law. The
matter might be further illustrated by another example.
Even among the Hindus, there are persons governed by the
Dayabhaga system of Hindu Law. If such a one acquired
property in Cochin it could not be that the Dayabhaga not
being prevalent in Cochin some system of law-not the
Dayabhaga but either the Mitakshara or some other system-
would apply in the absence of course of some valid statutory
provision to determine either the rights to property or its
devolution. The reasoning of the learned Judges, therefore,
proceeds upon a basic wrong assumption that the Mitakshara
law as understood and administered in Cochin State was some
sort of lex situs which would apply to determine the rights
of parties whatever might be their Person Law i.e., Hindus
following either the Mitakshara as understood elsewhere or
governed by some system other than the Mitakshara or not
being Hindus governed by some other system of law. As
stated in Mayne’ Hindu , Law(1) though in a slightly
different context
“Prima facie any Hindu residing in a
particular province of India is held to be
subject to the particular doctrines of Hindu
Law recognised in that province…………
This law is not merely a local law, it becomes
a personal law and a part of the status of
every family which is governed by
it…………….. In this respect the rule
seems an exception to the usual principle, the
lex loci governs matters relating to land and
that the law of the domicil governs personal
relations. The same rule as above would apply
to 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.”
(1) Mayne’s Hindu Law, 11th Edn. para 56.
670
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 urged in the
appeal as regards whether and to what extent the debt under
the mortgage evidence by Ex. ‘E’ went towards the discharge
of the antecedent debts of the father for it is only for
such amount that the Bank can claim a mortgage decree
against the share of the appellant in the family properties.
Before examining the facts in relation thereto, it is
necessary to narrate briefly the manner in which the
attention of the Courts were directed to this point. In its
plaint the Bank averred that the debt was incurred for a
family purpose, it being stated to be in connection with a
family business. This was denied and it is now common
ground that the debt was incurred merely for the starting of
a new business by the father and was not for any ancestral
family business. So far as the plaint went, the Bank had no
case that the debt secured by the mortgage was one binding
on the family as being for a necessary purpose. Also in
terms there was no plea that the mortgage was binding on the
son’s share by reason of the debt being for the discharge of
the antecedent indebtedness of the father. The defence on
behalf of the appellant was threefold: Besides the usual
formal denial of the
(1) 51 I.A. 129.
mortgage not being supported by consideration, the
contentions raised were: (1) That the mortgage debt was not
binding on the appellant’s share of the family properties
for the reason that the debt was not incurred for purposes
which in law were either necessary or binding on the family,
and (2) that the debts were tainted with illegality or
immorality. The findings which were recorded on these three
defenses were concurrent and are no longer in controversy.
It was found that the mortgage was fully supported by
consideration, that the debt was not incurred for any
necessary or beneficial purpose of the family and lastly
that the purpose for which the debt was incurred was neither
illegal nor immoral. In this context it should be
remembered that the suit was filed by the bank on June 17,
1948 before Cochin became part of the Indian Union. At that
date there could be no doubt that if the Courts at Cochin
applied the Hindu Law as understood by’ the High Court of
that State disregarding the circumstance arising from the
domicile of the mortgagors, the question whether the debt
secured by the mortgage was or was not for discharging an
earlier antecedent indebtedness of the 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
672
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 Judge that the Hindu Law as
understood and expounded in Brij Narain v. Mangla Prasad (1)
would apply to determine the rights of the parties to the
transaction and if that law were applied, on the finding
that there had been a partition in the family which was
stated to be fair under which a proper provision had been
made for the discharge of the debts of the father, coupled
with the finding that debts under Exs. A & B were not
incurred for a family trade or for a purpose binding upon
the family, the mortgagee was not entitled to a decree
against the security under Ex. ‘E’ which could not extend
to the share allotted to the appellant under the partition-
Ex. VI. The learned trial Judge made an incidental
finding, or more correctly an observation which it must be
taken to be on the state of the pleadings, that the debts
evidenced by Exs. A & B did not go to discharge any
antecedent liability of the father. When the matter went up
in appeal before the High Court the learned Judges
considered that even if Brij Narain v. Mangla Prasad(1) was
applied and even if the finding that there had been no
ancestral trade and that the debt had not been incurred for
a family purpose were accepted, there would still be need to
ascertain whether there was any antecedent debt of the
father which had been discharged by the execution of the
promissory notes Exs. A and B and the mortgage deed Ex. E.
For this purpose they called for a finding from the
Subordinate Judge under O. XLI. r. 25, Civil Procedure Co-de
and having regard to the state of the pleadings and the
evidence they raised a specific issue on that point and
directed the Subordinate Judge to afford the parties a
further opportunity of adducing such evidence as they
desired on the matter. The Subordinate Judge accordingly
heard further evidence and recorded a specific, finding that
the debts under Exs. A and B were not for the purpose of
discharging any antecedent debts which
(1) 51 I.A. 129.
673
could really be termed to be independent transactions. The
appeal was thereafter heard and the learned Judges, after
considering this finding, dissented from the view there
expressed and held that out of the Rs. 80,000 which were the
principal amounts covered by the two promissory notes-Exs.
A & B, there was, an antecedent debt to the extent of Rs.
59,000 and odd. Though on this finding, if the decision in
Brij Narain v. Mangla Prasad(1) were applied, the bank would
have been entitled to a mortgage decree only in respect of
the principal sum of Rs. 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 Rs.
80,000 covered by Exs. A and B a sum of Rs. 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 Bank would have the right to a
mortgage decree as against the appellant. The learned
counsel for the appellant has strenuously contended that
this finding of the High Court is wrong and that the entire
transaction by which the father obtained finances for
implementing the pepper contract with the Government of
India was one single and entire transaction and that it was
not capable of being split up, as the learned Judges of the
High Court had done
(1) 511. A. 129.
674
in order to record a finding of antecedency for a part of
the suit-mortgage debt. On the other hand, the learned
counsel for the respondent has submitted to us that not only
were the learned Judges of the High Court right in holding
that Rs. 59,000 and odd was an antecedent debt but that the
learned Judges should have gone further and held that the
entire sum of Rs. 80,000 covered by Exs. A and B was for
the discharge of antecedent debts.
This question of fact was the principal matter of contest
before us. We shall start by briefly summarising the
transactions between the 1st defendantfather’ and the Bank.
The first defendant entered into a contract with the
Government of India for the supply to them of 2000 Cwts. of
pepper in or about May 7, 1945. The total cost of the
supply was Rs. 1,37,000. He entered into similar contracts
later in October and November 1945 and under these the value
of the goods to be supplied was respectively Rs. 1,23,000
and Rs. 3,63,000. Even for implemening the first contract
of May 1945, the first defendant apparently had need to
borrow. An application for a loan was made on or about the
4th or 5th of June 1945 and then the 1st defendant sent the
documents of title that he held in respect of his properties
in Cochin and ‘desired accommodation by way of an over-draft
for Rs. 50,000 from the Bank. The letter by the 1st
defendant to the Bank is not on the record but it is seen
that these documents were sent to the legal Advisor of the
Bank on June 6, 1945 and the latter was directed to
scrutinise them and inform the Bank whether the documents
were complete. They were returned on the same day with a
note stating that the Bank should satisfy itself whether the
particulars set out in the letter were true and if this were
so the amount could be paid on a mortgage by deposit of
title deed. This letter of the Legal Adviser as well as the
request of the 1st defendant 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
675
directors on the same day with a limit up to Rs. 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 Rs. 45,000.
A loan of Rs. 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 Rs. 15,000 was lent. The sum of
Rs. 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 Rs.
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
President of the Bank dated June 11, 1945 to which reference
has already been made. The amount due on the two promissory
notes with interest due up to June 19, 1945 came to Rs.
45,054/11 and this was the debit with which the account
opened. Subsequently there were operations in this account
either i.e., both by way of payment in, as well as of
withdrawal from this account and on November 14, 1945 the
date of the promissory notes Exs. A & B the amount due
under this account was Rs. 50726/15/4. We shall be
referring to how this account was squared on November 20,
1945 after referring to the history of the No. 2 overdraft
account of the 1st defendant with the Bank.
The 1st defendant made a second application for a loan on
October 8, 1945 to the Bank for overdraft accommodation up
to a limit of Rs. 3,00,000. The security that he offered
for the fresh advance that he required was the contracts
entered into by the Government of India which he said would
be pledged with the Bank and he suggested that the advances
might be made to him on the security of the Inspection Notes
of the goods that he would be supplying
676
to Government. He also promised that the receipt for Rs.
50,000 which had either been or would be deposited with the
Government of India as security for the due fulfillment of
the contract, would be pledged with them, so that they would
be in a position to obtain payment of that sum from the
Government themselves. The Bank, however, demanded that in
addition to pledging the amounts which would be received
from the Government under the contract, the 1st defendant
should also create a mortgage by deposit of title deeds ‘of
properties in Palomar for the loan that he desired. The
proposal by the 1st defendant was considered at a meeting of
the Board of Directors of the plaintiff-bank and it was
resolved to give him additional overdraft facility to the
extent of Rs. 60,000 which was split into two parts (1) Rs.
30,000 on the security of properties at Palghat in regard to
which a mortgage was to be created by deposit of title
deeds, and (2) a further sum of Rs. 30,000 to be advanced by
an increase in the overdraft limit of Rs. 50,000 on the
Cochlea properties. This resolution was passed on November
4, 1945. But even before this resolution was passed and
obviously in anticipation of the decision of the Directors
the overdraft account No. 2 of the, 1st defendant with the
Bank at Palghat was opened on October 24, 1945 with a limit
of Rs. 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 Rs.
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 Rs. 50,726/15/4. On the No.
2 account the amount due to the Bank was Rs. 59952/12/5.
It, was with this state of the account
677
that Exs. A & B were executed and the loan of Rs.80,000
secured by the suit mortgage was raised. This sum of Rs.
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 Rs. 29,000 odd
that would still have remained due to it as an unsecured
debt due from him. On the other hand, the head office of
the Bank at Trichur handed over to the 1st defendant a draft
for Rs. 80,000 made out in favour of the 1st defendant on
its branch at Palghat. That the draft was handed over to
the 1st defendant is admitted. It was handed over at a time
when so far as the previous indebtedness was concerned, the
bank held no security though there might have been a promise
to create one. This draft was taken by the 1st defendant to
Palghat and was paid by him into his No. 2 account which
therefore became reduced from a debit of Rs. 59,952 and odd
to a credit of over Rs. 20,000. It was on this feature and
this operation on the account that the learned Judges of the
High Court relied on for their conclusion that the Rs.
59,000 odd was an antecedent debt which was discharged by
the draft of Rs. 80,000 handed over by the Bank when Exs. A
& B were executed. It now remains to narrate how the No. 1
account under which the 1st defendant was a debtor to the
extent of Rs. 50,726 and odd became discharged. The 1st
defendant drew a cheque in his own name on November 20,1945
from his No. 2 account in which he had an overdraft limit to
the extent of Rs. 50,000 and paid this cheque into his No.
1. account. There was a small balance of Rs. 726/15,/4 due
which was paid in cash and that account was closed on
November 20, 1945. On these. facts the question now for
consideration is whether this loan of Rs. 80,000 is or is
not sufficiently dissociated from the liability of the 1st
defendant under the No. 1 and No. 2 accounts which existed
before that date, for admittedly the entire sum was utilised
to discharge the debt remaining due to the Bank on November
20, 1945.
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Learned counsel for the appellant raised a sort of
preliminary objection that the learned Judges of the High
Court having categorically found that there was an
antecedent debt which was discharged by the suit-mortgage
loan only to the extent of Rs. 59,000 and odd and there
being no appeal by the Bank against the finding that the
balance of the Rs. 80,000 had not gone in discharge of an
antecedent debt, the respondent was precluded from putting
forward a contention that the entire sum of Rs. 80,000
covered by Exs. A & B went for the discharge of antecedent
debts. 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 Rs. 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 Rs. 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 facility of Rs.
1,10,000 covered by Exs. A, B & C should be viewed as a
single and entire transaction commencing from the grant of
the loans on June 6, 1945 in anticipation of security being
furnished, right up to the date when the suit-promissory
notes were executed and the mortgages by deposit
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of title deeds was created. We are, unable to accept this
submission in its entirety. It is, no doubt, true that the
transaction with the Bank, so far as the debtor was
concerned, was one by which he obtained a loan for financing
the implementation of his contract with the Government of
India for the supply of black pepper but that by itself
would not be sufficient to negative such a financing being
composed of independent transactions, though directed to the
same end. Learned counsel for the appellant did not deny
that this was possible nor did he contest the position that
if there was a real dissociation in fact, the circumstance
that the creditor was the same or that the several loans
that were made, were for fulfilling the same purpose of the
borrower would not by themselves detract from there being
real antecedence for a later borrowing. It is, therefore,
essentially a question of fact and the matter has to be
viewed with reference (a) to the nature of the transactions,
and (b) the intention of the parties, and (c) the inferences
to be reasonably drawn from the form which the parties
adopted for putting through their intention. It is in the
context of these considerations that we are inclined to hold
that there was a real and factual antecedency between the
loan of Rs. 80,000 for which the draft was given on November
16, 1945 and the previously existing indebtedness of Rs. 1,
09,000 and odd in the overdrafts account No. 1 and 2 of the
1st defendant to the Bank which was discharged thereby. On
November 16, 1945 when the draft was handed over there was
admitted a debt of over Rs. 1, 09,000 due from the 1st
defendant to the Bank. Though there had been an agreement
that the title deeds of the 1st defendant’s Cochin
properties would be deposited with the Bank a security, the
same had not yet been done and the loan therefore still
continued to be a loan on the personal security of the
debtor. At that date this bank draft for Rs. 80,000 was
handed over to the debtor for the purpose of discharging the
previous loans due to the Bank. Learned counsel might be
right in saying that the previous loan of Rs. 1,09,000 and
odd
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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 Rs. 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
Rs. 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 Rs. 80,000 discharging an
antecedent debt. Factually that the loan of Rs. 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 would have greater force and substance. That
however, was not the form which the transaction took, and we
cannot but assume that the form reflected the intention of
the parties. If instead of handing over a demand draft to
the 1st defendant, which has actually happened, the Bank had
credited the amount to the 1 st defendant in his overdraft
account then there would have been an unity between the
transaction which started on June 6, 1945 and which
culminated in the execution of the two promissory notes-Exs.
A and B and the security for the repayment thereof Ex. E so
as to render all of them a single transaction, but that was
not the method adopted by the creditor or the debtor. When
a fresh loan of Rs. 80,000 was granted under Exs. A & B and
a bank draft for that amount was handed over, it was done
without taking into account the preexisting liability for
Rs. 1,09,000 and odd owed by the 1st defendant to the Bank,
so that when the draft was handed over there was a total
liability of Rs. 1,89,000 payable by the 1st defendant to
the Bank. If the appellant’s father had failed to credit
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the demand draft into his No. 2 overdraft account which it
was undoubtedly within his power to do, his total
indebtedness would have been Rs 1,89,000. He however paid
the draft into his No. account so that the total
indebtedness to the Ban on the two accounts became Rs.
109,000. From No. 2 account a sum of Rs. 5,000 he drew to
discharge ,a liability of Rs. 50,000 under the No. 1
account. so that in effect No. 1 and No. 2 accounts were
fully discharged and Rs. 29,000 became thereafter outside
the security created under Ex. E by the 1st defendant in
favour of the Bank. In the circumstances we consider that
the entire loan of Rs. 80,000 went in discharge of
antecedent debts though the same was owned by the 1st
defendant to the same creditor.
Before concluding it is necessary to refer to variation
which the High Court made as regards amount recoverable from
the properties of the family in Cochin. This was because of
the construction and effect of Ex. J which was the
memorandum which evidenced the deposit of the title deeds of
the Palgh properties and which was executed on April
23,1946. Under Ex. J the property mortgaged was not merely
the properties in Palghat but the equity of redemption of
the Cochin properties which had been the subject of mortgage
under Ex. F for, Rs. 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 Rs. 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 Rs. 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 Rs. 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
682
of Rs. 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 decree in this case
in respect of the above sum Rs. 3,792/2/1 and
interest thereon”.
Learned counsel for the appellant -faintly suggested that
the learned Judges were in error in passing a decree for
this further sum of Rs. 3792/2/1 in this suit. It is,
however, unnecessary for us to go into the merits as to
whether the learned Judges were right in the construction of
Ex. J and the legal results flowing therefrom as we are
satisfied that the appellant is not entitled to raise this
point. This was not one of the points raised in the grounds
of appeal to this Court when an application was made for the
grant of a certificate of fitness, nor is this objection to
the decree to be found in the statement of the case filed.
In the circumstances, we need say no more about it.
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed.
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