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1939 Supreme(SC) 57
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD THANKERTON, SIR GEORGE RANKIN, AND. SIR PHILIP MACDONELL.
SUNIL KUMAR KERR - Appellant
Versus
SISIR KUMAR KERR - Respondents
On appeal from the High Court at Calcutta.
Decided On : Nov. 10. 1939.
Solicitors for appellant:W. W. Young, Sons & Ward. Solicitors for respondents Nos. 5 and 6: A. J. Hunter & Co.
Executors possess a statutory power under Section 307 of the Indian Succession Act to mortgage immovable property unless the will expressly restricts it. Lenders are not required to inquire into the testator's prior practices regarding asset usage, ensuring the practicality of the statutory power.
Headnote:(A) Indian Succession Act, 1925 - Section 307 - Power of executors to dispose of immovable property - Mortgage executed by executors to raise funds for the testator's business - Validity of mortgage - Statutory power under Section 307(1) allows executors to dispose of property as they think fit, subject to restrictions in the will under Section 307(2) - In the absence of express restrictions in the will, the statutory power to mortgage immovable property remains intact - A lender dealing with executors is not required to inquire into the testator's prior practices regarding the use of real estate for business purposes beyond the terms of the will and the mortgage deed - Imposing such a duty of inquiry would undermine the utility of the statutory power conferred on executors.
(B) Executor vs. Trustee - Transition from executor to testamentary trustee - Question of assent to the trust is a question of fact - If not raised and decided in the courts below, such a plea cannot be entertained at the appellate stage.
Facts of the case:
The testator left a will appointing executors with authority to carry on his printing and publishing business. The executors mortgaged certain immovable properties, which had been acquired from business profits, to secure a loan for business expansion. The beneficiaries of the estate challenged the validity of the mortgage, arguing that the executors lacked the authority to mortgage immovable property not actively engaged in the business at the time of death and that the executors had transitioned into trustees, thereby losing the statutory powers of executors.
Findings of Court:
The court found that the will did not impose any restriction on the statutory power of the executors to dispose of property under the Indian Succession Act. Furthermore, the mortgagees were not under a duty to inquire into the testator's specific practices prior to death to determine if the properties were treated as part of the business.
Issues: Whether the mortgage executed by the executors was binding on the estate and whether the mortgagees had constructive notice of any defect in the executors' power to mortgage the immovable properties.
Ratio Decidendi: Under Section 307 of the Indian Succession Act, executors have a statutory power to dispose of immovable property unless the will imposes specific restrictions. A party dealing with executors is entitled to rely on this statutory power and is not required to conduct an exhaustive inquiry into the testator's historical treatment of assets, as such a requirement would render the statutory power impractical.
Result: Appeal dismissed, with costs; judgments affirmed.
Legal Category Hierarchy
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succession and wills
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executors and administrators
- power of disposal
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executors and administrators
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property law
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mortgages
- validity of mortgage
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mortgages
Judgement
Appeal (No. 91 of 1936) from a judgment and decree of the High Court in its appellate jurisdiction (December 7, 1934) affirming a judgment and decree of the High Court in its ordinary original civil jurisdiction (February 15, 1932).
The only question for decision in this appeal was whether a deed of mortgage, executed on April 11, 1927, by the respondents, Dhirendra Chandra Kerr and Narendra Chandra Kerr, as executors of the will of their father, Thakur Das Kerr, in favour of Sreemutty Indira Ghosh, now represented by the respondents, Prabas Chandra Mullick and Dulal Chand Aich, was a valid mortgage binding on the estate of Thakur Das Kerr and on the properties which were the subject of the mortgage.
Thakur Das Kerr, who died on October 5, 1919, had carried on a publishing and printing business under the name of R. Cambray & Co., and by his will, dated December 16, 1917, he appointed two of his sons to be executors (the above-named respondents) and authorized them to carry on his business. He died possessed of zemindary properties outside Calcutta, house property in Calcutta, Government promissory notes, War Stock, and shares in railways, banks and various companies, all of which he had acquired out of the profits of his business.
On April 11, 1927, the executors executed a mortgage in favour of Sreemutty Indira Ghosh of Nos. 11A, 11/1, Halder Lane, and Nos. 3, 5 and 6, Halder Lane, Calcutta, to secure a sum of Rs.65,000, with interest at nine per cent. The money so borrowed was to be used for the purposes of the business. In 1929 the mortgagee brought a suit on her mortgage in the High Court, and on July 5, 1929, she obtained a preliminary decree, and on August 18, 1930, a final decree.
In the meantime—namely, on August 31, 1929, the appellant, Sunil Kumar Kerr, and the respondents, Sisir Kumar Kerr and Sasadhar Kumar Kerr, who were all grandsons of the testator, being the sons of Narendra Chandra Kerr, one of the executors, as plaintiffs instituted in the High Court the suit out of which this appeal arose against their father and uncle, the two executors, the mortgagee, a puisne mortgagee, and various unsecured creditors and other members of the family, asking for (inter alia) construction of the will of Thakur Das Kerr, administration of his estate, and a declaration that the mortgage was invalid and not binding on the estate.
The facts and the terms of the will appear from the judgment of the Judicial Committee.
Ameer Ali J., who heard the suit, dismissed it as regards the declaration claimed.
On appeal by the appellant to the Appellate Bench of the High Court (Lort-Williams and Jack JJ.) the judgment of the Court was delivered by Jack J., who said that one of the points to be decided was whether the executors had authority to mortgage the immovable properties of the testators estate for the purpose of the business, and he considered that in the circumstances it was difficult to hold that the Calcutta house properties which were the subject of the mortgage could be regarded as quite unconnected with the business so as not to be available in order to raise funds for the business when required, and he therefore concluded that the trial judge was right in holding that the executors were authorized to execute the mortgage in question. The appeal is reported at ( 1934) I. L. R. 62 C. 552.
1939. Oct. 26, 27. L. P. E. Pugh K.C. and S. P. Khambatta for the appellant. When a testator simply states in his will that his business is to be carried on by his executors, they can only resort to whatever part of his estate was engaged in that business at the time of his death. In order, therefore, that a mortgage effected by the executors can operate to take away property from the legatees under the will, it must be shown that the testator had actively engaged that particular property in the business. The testator in the present case had never mortgaged his immovable property at all. It must be admitted that the property which wa
