Judgement

Appeal (No. 51 of 1938) from a judgment and decree of the High Court in its appellate jurisdiction (March 16, 1937) affirming a decree of the High Court in its ordinary original civil jurisdiction (July 30, 1936).

The question for determination in this appeal was whether the suit out of which it arose was maintainable. The facts were not in dispute.

Cooverji Umersey & Co., a firm carrying on business in partnership in Bombay as merchants, commission agents and shroffs (native bankers), consisted in 1925 of nine partners, Cooverji Umersey, the respondent, and his father, Umersey Katchra, and seven others, who were defendants Nos. 4 to

10. On September 30, 1925, one Mawji Waghji and Monghibai, his wife (the appellant), borrowed Rs. 1,20,000 from the firm of Cooverji Umersey & Co., with whom Waghji had had joint ventures in cotton. A promissory note for Rs. 1,20,000 was executed in favour of the firm by Waghji and his wife, and 676 bales of cotton were hypothecated to the firm as security for the loan. In addition to those bales, the title-deeds of two houses belonging to the appellant and her husband, and situate at King Lane and Borah Bazar Street, were deposited with the firm as equitable mortgage security. In default of payment the firm was to have recourse to the pledge on the bales in the first instance, and to proceed against the house property for any deficiency.

On default in the payment the firm sold the bales for about Rs. 55,000. It was the appellants opinion that the sale was for a sum far below their market value.

In November, 1926, seven of the partners of the firm, defendants Nos. 4 to 10, retired from the firm. On November 6, the tenth defendant by oral agreement released all his interest in the assets of the firm to the respondent and his father. On November 17, 1926, the other six retiring partners executed a document purporting to assign their interest in the partnership property to the respondent and his father. That document, which included their interest in mortgage securities, was not registered as required by s. 17, sub-s. 1 (b), of the Indian Registration Act (XVI. of 1908). The respondent and his father continued the business in the firm name.

On January 21, 1927, the firm as then constituted brought the suit giving rise to this appeal against Waghji and his wife, claiming that they were equitable mortgagees of the two houses, for an order that the defendants pay them Rs. 1,33,500, with interest on Rs. 1,20,000 at 9 per cent, per annum from January 1, 1927, until judgment, and that in default of payment the mortgaged properties might be sold and the proceeds applied in and towards payment of the plaintiffs claim. The defendants filed a joint written statement and counterclaimed in respect of the loss alleged to have been sustained by them on the 676 bales of cotton sold by the firm. Their main objection to the suit was that the action was not maintainable, the contention being that the document of November 17, 1926, which purported to assign the interest of the retiring partners in the mortgaged property to the plaintiffs, was a document requiring registration, and, not having been registered, it was inadmissible in evidence. They submitted that the mortgage rights in the house property still remained in the nine original partners, and that the plaintiffs could not enforce the mortgage security. Waghji was adjudicated an insolvent in 1930, and the Official Assignee was substituted as defendant No. 3. Umersey Katchra died pending the trial of the action.

The trial judge (Wadia J.) in an interim judgment on July 9, 1934, was of opinion that the document of November 17, 1926, was one which required registration, and he also expressed the opinion that a partner has an interest in the immovable property of a partnership, which would include a mortgage executed in favour of the partnership, and any assignment of such interest, if of the value of Rs. 100 or more, must be created by a registered instr