Present: Jayewardene A.J. 1923.

KANAGARATNA  v. BANDA.

 161-C. R. Anuradhapura, 11,755.

Mortgage bond-Subsequent oral agreement that mortgagee should cultivate land and take produce in lieu of interest-Evidence Ordinance, s. 92-Ordinance No. 7 of 1840, s. 2-Use and occupation- Obiter dictum.

Plaintiff sued defendant to recover the principal and interest due on a bond. Defendant denied that any interest was due, as subsequent to the date of the bond under a verbal agreement, plaintiff cultivated the land mortgaged and took the produce in satisfaction of interest.

Held, that oral evidence was admissible to prove the agreement.

" The agreement pleaded does not contradict or vary the terms of the mortgage bond. The defendant can prove that the plaintiff received the rents and profits of his land in payment of interest that became due. The defendant cannot, of course, insist on his oral agreement being enforced, and cannot insist on the plaintiff continuing in possession of the property and receiving the rents in lieu of interest that may become due in the future, for that would be to vary the terms of the bond.

THE facts are set out in the judgment.

H. V. Perera, for the appellant.

James Joseph (with him Rajakariar), for the respondent.

August 23, 1923. JAYEWARDENE A.J.-

This case raises a small point, but a point of practical importance. The plaintiff sued the defendant on a mortgage bond dated July 11, 1917, to recover the principal, Rs. 100, and the interest due under it which was at the rate of 30 per cent, per annum. The defendant answered admitting that the principal sum alone was due, and stating that the interest had been paid. In the fourth paragraph of his answer he alleged " that in the month of November, 1917, it was agreed between the plaintiff and the defendant that the plaintiff should cultivate the land mortgaged to him and take the produce in satisfaction of the interest due on the said mortgage bond and on a loan of Rs. 20 for which a promissory note was given by the defendant to plaintiff on December 3, 1917. That from the said date the plaintiff got the said land cultivated by his son-in-law, Kiri Banda Arachchi, and took the. produce, and thus paid himself the interest due upon the said bond and the said promissory note."

At the trial the proctor for the plaintiff raised the issue " whether oral evidence can be led to prove that plaintiff was allowed to possess

 

the mortgaged land in lieu of payment of interest." He argued that an agreement such as is contemplated in the answer created an . interest in land, and under section 2 of Ordinance No. 7 of 1840 was not valid without a notarial document. Defendant's proctor argued that'' the plaintiff did not possess the land in lieu of interest, but that he paid himself the interest out of the produce of the land."

The Commissioner observed that this was a distinction without a difference, and decided the issue in the negative and gave judgment for the plaintiff. The defendant appeals. It is contended for him that the agreement referred to in the answer does not contradict, vary, add to, or subtract from the terms of the mortgage bond, and that, therefore, section 92 of the Evidence Ordinance does not prevent him from proving the agreement, and that as the agreement has been acted upon and the plaintiff has taken the produce of the defendant's land, it can be proved, notwithstanding the provisions of section 2 of Ordinance No. 7 of 1840. Counsel for respondent supports the judgment and relies very strongly on the local cases of Mudianse v. Mudianse[1 (1895)2 N. L.R. 86] which is a FulI Bench decision. So that two points arise for decision in this case: First, whether the agreement contradicts or varies the terms of the bond ; and second, if not, whether it can be proved in view of section 2 of the Ordinance of Frauds. It seems to me that in its essence the agreement pleaded in the