1933 Present: Garvin A.C.J. and Maartensz A.J.

CARRON v. FERNANDO et al.

 360-D. C. Negombo, 6,637.

Lease-Mortgage of leasehold interest-Nature of notarial lease-Jus in Effective charge against third party-Rate of interest-Proof that it is ; not unreasonable-Ordinance No. 2 of 1918, s. 4.

A notarially executed lease of land creates a real right in the land and a duly registered mortgage of the leasehold interest is an effective and an enforceable charge into whosoever's possession that interest may pass.

A person is not entitled to recover interest at a higher rate than 15 per cent. upon a loan exceeding Rs. 2,500 in the absence of proof of special circumstances showing that the rate is not unreasonable.

THE plaintiff, as the executrix of the estate of the late T. K. Carron, instituted this action to recover moneys alleged to be due to the estate upon a bond No. 450 of January 9, 1929, whereby the first and second defendants hypothecated to and with the said T. K. Carron all their interests in a lease of the premises described in schedule A and, in addition, the lands and premises described in schedule B. The leasehold interests hypothecated were created by a deed No. 35 of June 28, 1927, whereby the fourth defendant granted the premises to the first and second defendants for a term of 12 years from April 4, 1927. The plaintiff further pleaded an assignment to Carron by the first and second defendants of a mortgage of the premises referred to in schedule C to secure the repayment to them of a sum of Rs. 40,000 advanced to the fourth defendant at the time of the lease. It was pleaded that this assignment had been granted by way of further security for the sum advanced on the principal bond. The plaintiff prayed for judgment for the sum claimed and a decree declaring that the leasehold interests referred to in schedule A and the premises described in schedules B and C be specially bound and executable for the amount of her claim. The first and second defendants admitted the debt but pleaded that the rate of interest, i.e., 18 per cent., was excessive and should be reduced. They further pleaded that Carron had not paid them the consideration for the assignment and asked that this sum Rs. 40,000 be set off against the money due on the bond. The third defendant who claimed to be vested with certain interests in the leasehold premises objected to a hypothecary decree being entered in respect of them. The learned District Judge entered judgment in favour of the plaintiff for the sum claimed and granted her a hypothecary decree in respect of the leasehold premises and the premises described in schedule C.

H. V. Perera (with him D. W. Fernando), for defendants, appellants.- The assignment to Carron by the first and second defendants of the mortgage created in their favour by the fourth defendant is an assignment for a money consideration of Rs. 40,000 and not an assignment by way of security for the moneys advanced upon the bond sued on. The consideration has not been paid and the first and second defendants claim this amount in reconvention. The plaintiff's answers to the interrogatories served on her amount to an admission of this claim. She is

further not entitled in law in view of the provisions of section 92 of the Evidence Ordinance to seek to contradict the terms of the assignment by parol evidence.

The rate of 18 per cent. interest prescribed in the bond sued upon is excessive and by reason of the provisions of the Money Lending Ordinance the Court has jurisdiction where interest is excessive to entertain any application to reduce the rate of interest.

The terms of the lease prohibit subletting except with the consent of the lessor; this would necessarily also include assignment either simply or by way of mortgage by the lessee except with the consent of the lessor -Wille on Landlord and Tenant, p. 273; Demas v. Saris and Chronis 1[(1909)