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1920 Supreme(SC) 48
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD BUCKMASTER, LORD ATKINSON, SIR JOHN EDGE, AND MR. AMEER ALI.
MATI LAL DAS - Appellant
Versus
EASTERN MORTGAGE AND AGENCY COMPANY, LIMITED, - Respondents
On appeal from the High Court at Calcutta.
Decided On : July. 2. 1920.
Solicitors for appellant :W. W. Box & Co. Solicitors for respondents: Watkins & Hunter.
A mortgagee requiring the mortgagor to appoint specific managers as a loan condition is not liable for their misconduct, as they remain the mortgagor's agents. Mortgages by parda-nashin ladies are valid if legal necessity and independent advice are established.
Headnote:(A) Transfer of Property Act, 1882 - English Mortgage - Appointment of managers - Agency - Where a condition of the loan is the appointment of specific managers by the mortgagor, such managers are agents of the mortgagor and not the mortgagee - Mortgagee is not liable for mismanagement, waste, or negligence of managers appointed by the mortgagor, nor is the mortgagee deemed to be in possession.
(B) Parda-nashin lady - Mortgage of property - Legal necessity and independent advice - To enforce a mortgage executed by a parda-nashin lady, it must be established that she had independent advice, sufficient intelligence to understand the relevant matters, and that the transaction was free from undue influence or misrepresentation.
(C) Interest - Penal interest - Stipulation for a higher rate of interest in the event of default in punctual payment - Such a provision is not necessarily penal and is enforceable as per the contract.
Facts of the case:
Two mortgages were executed as English mortgages under the Transfer of Property Act, 1882. A condition for the advance of the loans was that the mortgagors appoint specific managers to manage the properties. One of the mortgagors was a parda-nashin lady holding a life interest who required funds to satisfy a court decree. The mortgagees sought to enforce the mortgages. The appellants contended that the terms were unconscionable, the managers were agents of the mortgagees, and the interest rates were penal.
Findings of Court:
The mortgages were enforceable and not unconscionable. The managers were agents of the mortgagors, and the mortgagees were never in possession. The parda-nashin lady acted under legal necessity and received independent legal advice, having the terms translated and explained to her. The stipulated interest rate of 9.5% for late payments was not penal.
Issues: Whether the mortgage terms were unconscionable; whether the managers were agents of the mortgagee or the mortgagor; whether the parda-nashin lady had independent advice and legal necessity; and whether the stipulated interest rate was penal.
Ratio Decidendi: A mortgagee is entitled to insist on the appointment of managers in whom they have confidence as a condition for lending, but this does not make the managers agents of the mortgagee. For transactions involving parda-nashin ladies, the court must ensure independent advice was provided and the terms were fully understood. A contractual agreement for a higher interest rate upon default is not penal.
Result: Decrees of the High Court varied to allow interest at 9.5% for installments not paid on time; otherwise affirmed and appeals dismissed.
Legal Category Hierarchy
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property law
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mortgages
- english mortgage
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pardanashin woman
- legal necessity
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mortgages
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law of agency
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agency
- agent of mortgagor
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agency
-
contract law
-
interest
- penal interest
-
interest
Judgement
Consolidated Appeals from a judgment and two decrees of the High Court (April 3, 1917) modifying a judgment and decrees of the Subordinate Judge of Dacca.
The suits giving rise to the appeals were instituted by the respondents, the Eastern Mortgage and Agency Co., Ld. (suing by its liquidator), against one Shyampeari Dasya, since deceased, the appellant Mati Lal Das, and others, to enforce two mortgages, the one dated September 22, 1890, executed by Mohini Mohun Das, and the other dated November 7, 1890, executed by Priyamoyi Dasya, a parda-nashin lady. The material provisions of the mortgages, which were identical in the two cases, and the circumstances of the cases appear from the judgment of their Lordships.
The Subordinate Judge who tried the cases held (inter alia) that the mortgages were not void as being unconscionable; that the named managers were agents for the mortgagors and not for the mortgagees, and that the mortgagees consequently were not responsible for their mismanagement or for their default in paying the agreed interest; that for half-years in which the interest was not paid punctually the mortgagees were entitled to be paid at 9 ½ per cent.; that Priyamoyi executed the mortgage of November 7, 1890, for necessity and with a full knowledge of its terms and effect.
Upon appeals the High Court affirmed the decision of the Subordinate Judge save in respect of the rate of interest. Upon that question it was held that the stipulation for interest at 9J per cent, was in the nature of a penalty, but that the mortgagees were entitled to reasonable compensation for the failure to pay the interest punctually, and that 7| per cent, interest on arrears should be allowed from the due date of payment.
1920 ; June 24. Clauson K.C. and E. B. Raikes for the appellant.
De Gruyther K.C. and Dube for the respondents, the assignees of the company.
July 20. The judgment of their Lordships was delivered by
SIR JOHN EDGE. These are consolidated appeals from decrees of the High Court at Calcutta which modified decrees of the Subordinate Judge of Dacca, which were made in two suits which were tried together. Each suit was a suit for sale on a mortgage of immovable property and they were brought by the respondents, the Eastern Mortgage and Agency Co., Ld., through the liquidator of the company. The rights and interests of the company in the decrees under appeal have been assigned to certain persons, who were added as plaintiffs and are respondents. The other respondent was Harry Loftus Weatherall, now dead, who is represented by his widow; he was a pro forma defendant. The appeals were brought by Shyampeari Dasya and Mati Lal Das, who were defendants. Shyampeari is now dead, and is represented by the appellant Mati Lal Das.
In one of the suits the mortgage sued upon was made on September 22, 1890, by Mohini Mohan Das, in favour of the company, for Rs. 250,000, and in the other suit the mortgage sued upon was made on November 7, 1890, by Priyamoyi Dasya in favour of the company for Rs. 120,000. The mortgages were by registered deeds. The mortgages were not of the same property. It was expressly stated in each mortgage that it should be read and construed as an English mortgage as defined in the Transfer of Property Act, 1882.
Mohini, the mortgagor in the one case, was the brother-in-law of Priyamoyi, the mortgagor in the other case, who was the widow of Mohinis brother Lal Mohan Das. The Hindu family to which Mohini and Lal Mohan belonged was governed by the law of the Dayabhaga. Their father, to whom in his lifetime the mortgaged properties had belonged, was Madhu Sadan Das, who was a wealthy banker of Dacca.
[The judgment stated in detail the facts as to the family, but for the purpose of this report it is sufficient to mention that the defendant Shyampeari was the widow of Madhu, and the defendant (appellant) Mati Lal, the only son of a deceased brother of Mohini, whose three other brothers died childless ; their Lordships
