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1916 Supreme(SC) 91
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD PARKER OF WADDINGTON, LORD SUMNER, SIR JOHN EDGE, AND SIR LAWRENCE JENKINS.
HAR CHANDI LAL - Appellant
Versus
SHEORAJ SINGH - Respondents
On Appeal From The High Court at Allahabad.
Decided On : December 18, 1916.
Solicitors for appellants :T. L. Wilson & Co. Solicitors for respondents: Barrow, Rogers & Nevill.
A mortgage is not discharged by a subsequent attempt to substitute security if that new security is legally invalid or not binding. Furthermore, Section 41 of the Indian Contract Act requires actual performance by a third party to discharge a contract.
Headnote:(A) Indian Contract Act, 1872 - Sections 41 and 62 - Code of Civil Procedure, 1908 - Section 11 and Order II, Rule 2 - Discharge of mortgage by substitution of contract - Performance by third party - Where a new security is intended to replace an old mortgage, but the new security is held not to be binding on the necessary parties, the original mortgage is not discharged. Section 41 of the Indian Contract Act applies only where a contract has been in fact performed by a person other than the person bound thereby; an unsuccessful attempt to create security or insufficient payment by a third party does not constitute performance.
(B) Equity and Good Conscience - A party cannot successfully maintain that a transaction is not binding upon them and consequently does not bind their heirs, while simultaneously claiming the benefit of that same transaction as a release of a prior liability.
Facts of the case:
A mortgagee held a mortgage over a five-sixths share of a property. Subsequently, the original mortgagor's widow and a relative executed new mortgages over the entire property to secure both the original debt and additional debts of the relative. It was later judicially determined that these new mortgages were not binding on the widow. The mortgagee then sought to enforce the original mortgage against the heirs of the original mortgagor.
Findings of Court:
The court found that the original mortgage remained unaffected. The intention to accept a new security was frustrated because the new deeds were not binding on the widow.
Issues: Whether the original mortgage was discharged by the subsequent attempted substitution of security under Section 62 of the Indian Contract Act, or by performance by a third party under Section 41 of the same Act.
Ratio Decidendi: The court ruled that Section 41 of the Indian Contract Act requires actual performance. Since the third party's attempt to create security failed and the proceeds from the sale of the third party's own share were insufficient to cover their own debts, no performance of the original mortgage occurred. Additionally, it is inconsistent with equity for heirs to repudiate a transaction to avoid its burdens while claiming its benefits to release a prior mortgage.
Result: Appeal succeeds, and the order of the Subordinate Judge is restored.
Legal Category Hierarchy
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property law
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mortgages
- enforcement of mortgage
- discharge of mortgage
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mortgages
-
contract law
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indian contract act, 1872
- performance of contracts
- novation and substitution
-
indian contract act, 1872
-
practice and procedure
-
code of civil procedure, 1908
- res judicata
- order ii rule 2
-
code of civil procedure, 1908
-
hindu law
- succession and property rights
Judgement
Appeal from a judgment and decree of the High Court (February 25, 1913) reversing a judgment and decree of the Subordinate Judge of Bareilly (July 8, 1911).
The suit was instituted by one Lala Chatri Lal (since deceased and represented in the appeal by the appellants) against the respondents as representatives of Jai Chand, upon a mortgage executed by the latter on November 13, 1876. The facts appear from the judgment of their Lordships.
The respondents by their written statement submitted, inter alia, (1.) that the mortgage of 1876 was discharged by that of 1887; (2.) that the claim was merged in the decree of the Privy Council in 1903, affirming the decision of the High Court that the mortgage by Nandan in 1887 was not binding upon her, and that the claim was consequently barred under s. 11 and Order n., r. 2 (2.), of the Code of Civil Procedure, 1908. Issues were framed upon these pleas.
The Subordinate Judge decided in favour of the appellants (plaintiffs) and made the usual mortgage decree.
Upon appeal to the High Court (Richards and Bannerjee JJ.) the decision was reversed. The learned judges held that at the time of the suit the mortgagee was neither possessed of nor entitled to the possession of the mortgage sued on, and that the suit was consequently not maintainable. They further held that the mortgagee must be taken to have accepted the performance by Phul Singh of the contract sued on and that under s. 41 of the Indian Contract Act it was thereby discharged.
1916. Nov. 6. De Gruyther, K.C., and Dube, for the appellants. There was no discharge of the mortgage sued on by a substitution of a new contract under s. 62 of the Indian Contract Act, 1872. It may have been intended that Nandans mortgage of 1887 should be in discharge of the mortgage of 1876, but having repudiated her liability under it she could not so contend, and the respondents, who were joined as parties to the Privy Council appeal upon her death, can be in no better position. There was no acceptance of performance by Phul Singh, or in fact any performance by him, so as to amount to a discharge under s. 41 of that Act. Sect. 11 and Order ii., r. 2 (2.), of the Code of Civil Procedure have no application to the facts of the case.
Sir W. Garth, for the respondents. When the mortgage of 1887 was held not to be binding upon the widow, the mortgagee was put to hi3 election either to enforce against her the mortgage of 1876, or to continue to hold Phul Singh liable upon his mortgage of 1887, which affected the whole mauza. He could not rely upon both mortgages. He must be taken to have accepted the liability of Phul Singh upon the decree against the whole property as a performance of the contract by Jai Chand.
Dube in reply. The decree against Phul Singh was only executed against his sixth share of the mauza.
Dec. 18. The judgment of their Lordships was delivered by
LORD PARKER OF WADDINGTON. This is an appeal from a decree dated February 25, 1913, of the High Court at Allahabad reversing a decree dated July 8, 1911, of the Subordinate Judge of Bareilly.
The question is whether the appellants are entitled to enforce a mortgage against the respondents.
The mortgage in question is dated November 13, 1876, and was executed by Jai Chand in favour of Lala Chatri Lai, the mortgaged property being a five-sixths share in the mauza Nagaria Bikrampur. The amount secured was Rs.5500. The mortgagor died leaving a widow, Musammat Nandan, and a separated nephew, Phul Singh. Under the Hindu law Musammat Nandan had a widows interest and Phul Singh had a reversion contingent on his surviving her in the property subject to the mortgage. Musammat Nandan could dispose of the property with the concurrence of Phul Singh, but Phul Singh could not, without the concurrence of Musammat Nandan, dispose of the reversion so as to defeat the interests of those who would become entitled if he died in her lifetime.
Phul Singh was the owner of the remaining one-sixth share in the ma
