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1920 Supreme(SC) 28
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD BUCKMASTER, LORD DUNEDIN, SIR JOHN EDGE AND MR. AMEER ALI.
VYRAVAN CHETTI - Appellant
Versus
SUBRAMANIAN CHETTI - Respondents
On appeal from the High Court at Madras.
Decided On : Apr. 26. 1920.
Solicitor for appellants :H. S. L. Polak. Solicitor for respondents: Douglas Grant.
An agreement to divide proceeds realized from a mortgage does not require registration under the Indian Registration Act to be admissible in a suit for the recovery of those proceeds, even if the agreement also affects the priority of security over the immovable property.
Headnote:(A) Indian Registration Act - Sections 17 and 49 - Agreement between first and second mortgagees - Admissibility of unregistered document - Whether an agreement to divide proceeds realized from a mortgage requires registration to be admissible in evidence in a suit for the recovery of such proceeds - If the effect of an agreement is to provide that realized money is to be divided in equal shares, it does not require registration under Section 17 of the Act.
(B) Registration of documents - Distinction between rights to property and division of proceeds - Where an agreement contains two distinct provisions, one relating to the regulation of rights against an estate and another regarding the division of realization moneys, the latter does not require registration to be admissible in evidence in a suit relating specifically to the realized money, even if the former would require registration for a suit relating to the estate itself.
Facts of the case:
First and second mortgagees of certain property entered into an agreement to stand on a relative position of equality regarding security and to divide and appropriate any realized amounts in equal halves. After part of the estate was realized, the second mortgagees instituted proceedings to obtain their share of the proceeds. The first mortgagees contested the claim on the grounds that the agreement was inadmissible for want of registration and that it lacked consideration.
Findings of Court:
The court found that the agreement was supported by consideration arising from contemporaneous loan arrangements. Regarding registration, the court held that the agreement did not need to be registered to be admissible in the current proceedings, as the suit pertained only to the division of realized money and not to the regulation of rights against the property itself.
Issues: Whether the agreement to divide realized proceeds of a mortgage required registration under Section 17 of the Indian Registration Act to be admissible in evidence in a suit for the recovery of such proceeds.
Ratio Decidendi: The court reasoned that if an agreement's purpose is merely the division of realized money, it falls outside the registration requirements of Section 17. Even if the agreement is interpreted as having two effects—establishing equality of rights and providing for the division of proceeds—the provision regarding the division of money is admissible in a suit for those funds, regardless of whether the provision regarding property rights would require registration for a suit concerning the estate.
Result: Appeal dismissed with costs.
Act Referred
Legal Category Hierarchy
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property law
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mortgages
- priority of security
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mortgages
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practice and procedure
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registration of documents
- indian registration act
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evidence
- admissibility of unregistered documents
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registration of documents
Judgement
Appeal from a judgment and decree of the High Court (November 28, 1917) reversing a decree of the temporary Subordinate Judge of Ramnad.
The suit was instituted by the respondents against the appellants to recover the sum of Rs. 23,576 under a written agreement dated March 14, 1907. The material terms of the agreement, and the circumstances in which it was entered into, appear from the judgment of their Lordships.
The Subordinate Judge held that the agreement was supported by consideration, but that it was inadmissible and invalid for want of registration. Upon appeal to the High Court the decree of the Subordinate Judge was set aside and the suit remanded for trial. The Chief Justice was of opinion that the agreement was only intended to operate upon sums realized as they were realized, and that it did
Law. Rep. 47 Ind. App. 188 ( 1919- 1920)
Vyravan C hetti V. Subramanian C hetti 54
not affect the rights of the parties against the mortgaged property. In his view therefore it did not require registration under s. 17 of the Indian Registration Act. Sadasiva Aiyer J. was of opinion that the agreement purported to extinguish the appellants priority of security over the immovable property mortgaged and that it therefore was required to be registered by s. 17. He held however that as the prayers of the plaint did not seek to affect any immovable property, s. 49 of the Act did not prevent the agreement from being admissible in evidence in the suit. He based his view upon the Full Bench decision in Pulaka Veetil v. Thiruthipalli . (( 1909) I. L. R. 32 M. 410.)
1920. April 26. De Gruyther K.C. and Dube for the appellants.
Sir Erle Richards K.C. and Kenworthy Brown for the respondents.
The judgment of their Lordships was delivered by
LORD BUCKMASTER. Their Lordships think it unnecessary to trouble counsel for the respondents in this case.
The appellants are the first mortgagees of certain property. The respondents hold a second mortgage upon the same estates. It is unnecessary to determine the circumstances under which those mortgages arose, or the history of the title of the mortgagor. It is sufficient to say that on March 14, 1907, an agreement was entered into between the first mortgagees and the second mortgagees which has given rise to the present dispute. The effect of that agreement was to put the first and the second incumbrances on a relative position of equality with regard to the security. The appellants having realized part of the estate, the respondents instituted the proceedings out of which this appeal has arisen for the purpose of obtaining their share of the proceeds to which they claimed to be entitled by virtue of the agreement. The answer that was raised was, first, that the agreement required registration, and not having been registered could not be given in evidence ; and, secondly, that in any circumstances no consideration had been given by which the agreement could be supported. With regard to the question of consideration it is sufficient to say that the learned judge before whom the case was first heard found that there was consideration from the fact that contemporaneously with the execution of this agreement there had been an arrangement made by which the defendants had profited by loans that the plaintiffs had made to the extent of Rs. 42,000, and the question was not further raised in the High Court. The point therefore is not open to the appellants ; but if it were, their Lordships think there was abundant evidence to support the conclusion of the Subordinate Judge.
The real question, therefore, which now arises is whether or no the agreement of March 14, 1907, required to be registered for the purpose of enabling it to be given in evidence upon these proceedings. That depends entirely upon the consideration of clause 3 of the agreement. Clause 3 of the agreement, after referring to the total amount of rupees that is owing to both the mortgagees and stating that interest is due to the first and
