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1932 Supreme(SC) 74
Privy Council At Allahabad
Sir Dinshah Mulla, Sir George Lowndes, Justice Lord Wright, JJ.
Shadi Lal -Appellant
Versus
Lal Bahadur and others -Resopndent
Appeal No. 25 of 1929, Allahabad Appeal No. 6 of 1927
Decided On : 19-12-1932
M.A. Majid
A mortgagee in possession must maintain accurate accounts under Section 76(g) of the Transfer of Property Act to claim interest. Additionally, there is no presumption that a joint family possesses joint property; the burden of proof rests on the party asserting the ancestral nature of the property.
Headnote:(A) Transfer of Property Act - Section 76(g) - Mortgagee in possession - Duty to keep accounts - Disallowance of interest - A mortgagee in possession is mandated to keep clear, full, and accurate accounts of all sums received and spent. Failure to maintain and produce such accounts justifies the disallowance of claims for interest.
(B) Joint Family Property - Burden of proof - No presumption that a family, because it is joint, possesses joint property - It is for the party asserting that properties are ancestral or joint family properties to specifically allege and prove such a claim.
Facts of the case:
A mortgagor executed a mortgage with possession of a share of a village to secure a loan and subsequently executed a security bond creating a charge on two additional properties to operate if the first mortgage was insufficient. After the mortgagor's death, the transferee of the mortgagee's interest sued the heirs for the principal and interest. The heirs contended that the properties were ancestral and the loan was not incurred for legal or family necessity. The trial court ordered the sale of all properties, but the High Court excluded the properties in the security bond, finding them to be ancestral, and disallowed interest due to the lack of proper accounts.
Findings of Court:
The court found that there were no pleadings in the written statement to support the claim that the properties in the security bond were ancestral. It also found that the appellant failed to maintain the accounts required by law, providing only summaries based on revenue records that omitted actual profits.
Issues: Whether the properties comprised in the security bond were ancestral and whether the claim for interest should be disallowed due to the failure of the mortgagee in possession to maintain proper accounts.
Ratio Decidendi: The court ruled that there is no presumption of joint property merely because a family is joint; the burden of proof lies with the party claiming the property is ancestral. Furthermore, under Section 76(g) of the Transfer of Property Act, the statutory obligation to keep clear, full, and accurate accounts is absolute for a mortgagee in possession, and failure to comply results in the loss of the claim for interest.
Result: Appeal partly allowed.
Legal Category Hierarchy
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property law
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mortgage
- mortgage by possession
- enforcement of mortgage
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joint family property
- ancestral property
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mortgage
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practice and procedure
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pleadings
- burden of proof
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pleadings
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statutory law
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transfer of property act
- mortgagee duties
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transfer of property act
Sir Dinshah Mulla.-
This is an appeal from a judgment and decree, dated 10th November 1926, of the High Court at Allahabad which varied a judgment and decree, dated 31st July 1923, of the Subordinate Judge of Bareilly. On 20th December 1905, Munshi Inder Sahai executed a mortgage of his share of a village situated at Bareilly to secure payment of Rs. 7,000 to him by Rai Kishun Lal on interest at the rate of 7-annas per cent per mensem. The mortgage was one with possession, and the mortgagee was put in possession of the property on the same day. The mortgage was for a term of five years. On 15th June 1906, the mortgagor executed a document called zamanatnama (security bond) by which he created a charge on two other properties, the charge to operate if the property mortgaged by the deed of 1905 was found to be insufficient for payment of the mortgage debt in full. It was stated in the document that both these properties belonged to the mortgagor.
Some time thereafter the mortgagor died leaving him surviving two sons, who are respondents 1 and 2 before the Board, and a widow, who is respondent 3. After his death the mortgagee obtained a decree on 26th April 1909, against heirs of the mortgagor for Rupees 679-6 6, being the balance of interest due up to 2nd January 1909, and recovered the amount from them. Respondents 4 to 7 are the heirs of the mortgagee, and the appellant is the transferee of their interest in all the properties. Respondent 8 held a lease of part of the mortgaged property from respondents 4 to 7 at an annual rent of Rs. 150. The lease expired some years ago, but it was alleged that a fresh lease had been granted to him by respondents 1 to 3. Respondents 9 to 12 are transferees of the interest of respondents 1 to 3 in some of the properties: On 20th December 1922, the appellant brought the suit out of which the present appeal arises in the Court of the Subordinate Judge of Bareilly against the respondents to enforce the mortgage by sale of all the three properties. The amount claimed was Rs. 14,000, of which Rupees 7,000 was for principal, and the balance for interest.
In their written statement, respondents 1 and 2 averred that “the mortgaged property” was ancestral, and that there was no necessity for the loan. They also pleaded that the mortgage debt had been paid out of the rents and profits of the mortgaged property, and that nothing was due to the appellant. Respondents 4 to 7 also filed a written statement alleging that they had transferred their interest to the appellant, and that they were wrongly joined as defendants to the suit. Several issues were framed by the Subordinate Judge of which the following three only are now material:
“2. Whether the mortgaged property was the ancestral property of Inder Sahai, and whether the debt was incurred for legal and family necessity and binding on the sons of Inder Sahai.”
“6. Whether the bond is paid up by the usufruct of the property.”
“10. Whether the plaintiff is entitled to any relief, and if so, under what terms and conditions.”
Several witnesses were examined on both sides. The trial Judge found on issue 2 that the mortgaged property was not ancestral. He treated the issue as one confined to the property mortgaged by the deed of 1905. He found issue 6 in the negative, and declared that the amount due under the mortgage was Rs. 14,000 to which he added Rs. 766 for costs, and a further sum of Rupees 935-10-8 for interest calculated at the rate of 6 per cent per annum on Rupees 14,000 from the date of suit up to 31st January 1924, being the date fixed for redemption. In the result he passed a decree for sale of the properties comprised both in the mortgage deed and the zamanatnama.
Respondents 1, 2 and 3 appealed to the High Court at Allahabad. The learned Judges of the High Court agreed with the trial Judge on his finding that the property mortgaged by the deed of 1905 was not ancestral, but held, differing from him, that the properties included in the zamanatnama we
