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1906 Supreme(Cal) 142

CALCUTTA HIGH COURT
Woodroffe, J., Rampini, J., Harington, J.
Giridhari Lal Ray - Appellant
Versus
Dhirendra Kristo Mukerjee - Respondent
Decided On : 29-08-1906

Headnote:

Equitable Mortgage - Mortgage - Transfer of Property Act, 1882, Section 58 - - Deposit of title deeds as security for a loan creates an equitable mortgage. A mortgage made by a Receiver appointed by the Court for the preservation of the property takes precedence over all other loans, even those made earlier for the preservation of the property. The Court has the power to order that the Receiver's mortgage should be a first charge on the property.

Fact of the Case:

The plaintiff lent money to the defendants and took title deeds of a property as security. The defendants later defaulted on the loan. The property was subject to a partition suit and a Receiver was appointed. The Receiver, with the Court's authorization, mortgaged the property to a third party to raise funds for the preservation of the property. The plaintiff claimed priority over the Receiver's mortgage based on his earlier equitable mortgage.

Finding of the Court:

The Court found that the plaintiff had established an equitable mortgage by depositing the title deeds. However, the Court held that the Receiver's mortgage, made with the Court's authorization for the preservation of the property, took precedence over the plaintiff's earlier mortgage.

Issues: Whether the plaintiff's equitable mortgage by deposit of title deeds took priority over the Receiver's mortgage.

Ratio Decidendi: A mortgage made by a Receiver appointed by the Court for the preservation of the property takes precedence over all other loans, even those made earlier for the preservation of the property. The Court has the power to order that the Receiver's mortgage should be a first charge on the property.

Final Decision: The Court upheld the Receiver's mortgage as a first charge on the property, taking precedence over the plaintiff's earlier equitable mortgage.

JUDGMENT

Rampini, J. - This is an appeal against a decree of the Subordinate Judge of Hooghly, dated 25th July, 1904, passed in a mortgage suit. The facts are these: The plaintiffs allege that on the 16th May, 1900, the defendants Nos. 1 to 4 deposited with them at Calcutta the title-deeds of a certain putni taluk, which had been advertised for sale, took a loan from them of Rs. 15,000 on a promissory note and paid off the arrears of the putni rent and stopped the sale on the 17th idem. The plaintiffs accordingly prayed for a mortgage decree against the property, as well as a personal decree against the defendants, who had executed the promissory note.

2. The suit was contested by the defendant No. 7, the Receiver of the property appointed by this Court on the 2nd September 1901, and by the defendant No. 8, in whose favour the defendant No. 7 had on the 11th May 1903 executed a mortgage of the property in question as well as of other property. The Subordinate Judge gave the plaintiffs a personal decree against the defendants Nos. 1 to 5 8nd 9, but disallowed their prayer for a mortgage decree. Hence the appeal.

3. The plaintiffs contend that they are entitled to a mortgage decree. I consider that on the evidence they are so entitled. The evidence on the plaintiffs' side is unrebutted. It shows that on the 16th May, 1900, the principal defendants deposited the title-deeds of the putni taluk with the principal plaintiff at his guddi. They executed a promissory note for Rs. 15,000. The parties then adjourned to the plaintiffs' attorney's office, so that there might be evidence of the payment of the loan. The attorney, Babu Gyanendra Narain Dutt, insisted that a fresh promissory note should be executed in his presence. This was done. It was signed by the defendants Nos. 3 and 4 for themselves and as executors of the estate of Chandra Kant Mukherjee.

4. The money was then paid. The very notes so paid were deposited next day in the Burdwan Collectorate and the sale at the putni taluk was stopped.

5. The Subordinate Judge was not satisfied that the deposit of the title-deeds and the loan were simultaneous. It appears to me that they were practically simultaneous, both having taken place within a few hours of each other on the same day. He also says it is. not shown that the title-deeds deposited were the title-deeds of the putni taluk.

6. I feel no doubt on this point. These title-deeds have been produced by the plaintiffs. They were mentioned in certain correspondence that took place afterwards between the plaintiffs attorney and the Receiver, Mr. Mukherjee.

7. They were also shown to Mr. Mukherjee, and the latter, when he subsequently executed a mortgage in favour of the defendant. No. 8, could not make over the title-deeds of the putni taluk in question, evidently because they had been deposited with the plaintiffs on the 16th May, 1900. It has next been contended that he transaction did not amount to an equitable mortgage, and the cases of Dixon v. Mucklston (1872) 8 Ch. App. 155, Ganpat Pandurang v. Adarji Dadabhai I.L.R.(1877) 3 Bom. 312, and Jaitha Bhima v. Haji Abdul Vyad Oasman (1886) 10 Bom. 634 have been relied on. But these cases are in my opinion in no way against the plaintiffs. There is evidence in this case of the contract upon which the provisions of the title-deeds originated, and there is also evidence of an antecedent debt for which the loan was contracted. There was then no other debt on the property except the claim for putni rent, for which the taluk was advertised for sale, and which is proved to have been satisfied by the very notes received by the defendant from the plaintiff. Then it is said that there was a partition-suit pending at the time of the deposit of the title-deeds and the advance of the Rs. 15,000. This was so no doubt, and the mortgage decree must be subject to the final orders in this partition-suit. But the Receiver had not been appointed on the 16th May 1900, so the equitable mortgage is not void,

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