UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY au' Xcrtuvw -1875-6. THE LAW OF MORTGAGE IN INDIA. BY EASHBEHARY GHOSE, M.A., TAGORE LAW PROFESSOR. CALCUTTA : THACKER, SPINK AND CO., tfjr Calcutta (Llni^rrsttg. MBAY : THACKER, VINING & Co. MADRAS : HIGGINBOTHAM & Co. LONDON: W. THACKER & Co. 1877. CALCUTTA : BT THACKEB, BPINK AND CO. TABLE OF CONTENTS. Page. LECTURE I. Early notions of security Real security, a development of mature jurispru- dence Short historical sketch of Roman law of pledge Similar notions traceable in early Hindu and Mahomedan law Classification of securities by Roman lawyers Rights of pledger and pledgee in Roman law, and in systems founded upon Roman law Mortgages of land in England Rights of mortgagor and mortgagee Influence of civil law ... 1 LECTURE II. Hindu and Mahomedan law of mortgages Hindu law Early notions of pledge Tradition originally essential to validity of pledge (Shib Chunder Ghosc v. Itmsick Chunder Ncogy) Pledgee had in early times only a right of detention Foreclosure, and power of sale, innovations Classi- fication of securities by Hindu lawyers Rule requiring tradition gradually fell into disuse Possession still important when any questions touching priority arise Text of Brihasputty "Equity of redemption" Sale by judicial process Beneficial pledge, and pledge for custody Important distinction between the two Right of pledgee to sue when pledge ia destroyed without his default Analogous rule in Code Civil Rule of Hindu law, interest not to exceed principal Influence of rule on Hindu law of pledges .24 LECTURE II. ( Continued.) Mahomedan Law of Mortgage Difference between Mahomedan Law and Hindu and English Law Rahn, literally detention Pledge invalid unless followed by transfer of possession Things capable of being pledged Those of which possession could be delivered Things which could be sold, but of which possession could not be given, could not be pledged Opinion of Shafei Pledge for contingent debt Liability of pledgee for loss or destruction of pledge Interest unlawful Influence of rule in retarding development of law of pledge Qualified power of sale Must be given by contract itself Bye-bil-waffa, a comparative modern innovation Conflicting opinions of Mahomedan lawyers as to its legality Opinion of Mahomedan law officer in Bussunt Ally's case Recognition of validity of Bye-bil-waffas in India Gradual recognition of hypothecation Probable influence of Hindu law Xo distinction between pledges of land and pledges of moveables Move- ables, originally the subject of pledge Gradual extension of pledge of land Hypothecation 49 JV TABLE OF CONTENTS. LECTURE III. Page. Conventional mortgages Different kinds of Simple mortgage Conditional sale Usufructuary Otti of Madras GaJtnn lahen of Bombay Mortgage how created Writing not essential Effect of Registration laws Parol defeasances inadmissible Mortgage by deposit of title-deeds Equit- able mortgage in English law Memorandum True nature of Registra- tion Proper subjects of mortgage General hypothecation invalid Capacity to mortgage Right of mortgagee to accessions Rights of mortgagor and mortgagee when pledge assumes a different form Syjnath Lull v. Bam din ( hcirdhnj Power of sale in Mofussil mortgages Bhowani Churn Matter's case . . 62 LECTURE IV. SIMPLE MORTGAGES. What constitutes simple mortgage Conflicting dicta Nature of security possessed by simple mortgagee How made available Decree for sale What passes under such decree Rights of puisne encumbrancer Haran mder Ghcte against Diimlnnxlhu Base Law of execution Practice of Continental Courts Effect of clause against alienation in mortgage deed Lit pendent Mortgagee not bound to proceed against pledge May waive his rights as mortgagee Sale of property "subject to mortgage" Sec. 271 of Act VIII of 1859 Sec. 270 how construed Right of simple mortgagee, a real right Defence of purchase for value not available Period within which security must be enforced Court in which mort- gagee must sue Conflicting decisions on the point 98 LECTURE V. Conditional sales Differences in form between conditional sales and English mortgages Difference between mortgages by conditional sale and sales with clause for repurchase Mortgagor does not generally incur any per- sonal liability Construction of the Sudder Dewany Adalut True meaning of " construction" Implied warranty of title by mortgagor Remedy for breach of warranty Remedy of mortgagee when pledge is accidentally destroyed Principle on which damages should be assessed Right of mortgagee to prevent waste when security is insufficient Reg. XVII of 1806 Process of foreclosure in Bengal Meaning of " stipulated period," iral representatives" Duty of Court on receiving application lation mandatory and not merely directory Distinction between mandatory and directory enactments Proceedings under Regu- ! Uvular suit Process of foreclosure elsewhere than in B'i)}.'.-< i on tin- ]>ract ice of the English Court of Chancery mortgagee to possession imiiu -diatcly on default How far in IW>ngal by Regulation XVII oi 1806 Limitation Acts XIV of l-si'J and IX of 171 .... 134 TABLE OF CONTENTS. V Page. LECTURE VL Equity of redemption Origin of expression Position of mortgagor before foreclosure Right to redeem Bengal Regulation XVII of 1806 Recog- nized by Courts of Justices in other Provinces Opinion of the Privy Council Pnttaveramier v. Vencatta Rom Naiker " Once a mortgage always a mortgage" Meaning of maxim Persons entitled to redeem Regulation XVII of 1806 Practice of English Courts of Chancery Mortgage security indivisible Effect of mortgagees purchasing portion of mortgaged property Contribution Redemption under Bengal Regu- lations Deposit or tender What a good deposit Rnkca Begum v. Pran- natli Roy Chorvdry Time within which deposit must be made Practice in Bombay and Madras Limitation Acknowledgment Effect of acknow- ledgment by one of several mortgagees Difference between English Statute and Indian Act 184 LECTURE VII. Usufructuary mortgage What constitutes usufructuary mortgages Personal liability of mortgagor Zuripeshgee leases Difference between Zuripesh- gee and ordinary leases Hanuman Persad Pandey's case Origin of Zuripeshgee leases Rights and liabilities of usufructuary mortgagee before and after repeal of Usury Laws Liability to account Right of redemption of mortgagor Simple usufructuary mortgagee not entitled to decree for sale Limitation 218 LECTURE VIII. Liability of mortgagee in possession to account Regulation XV of 1793 Meaning of " gross receipts " Mortgagee not competent to create middle- men Allowance for expenses of collection Practice of our Courts Nature of accounts which mortgagee is bound to produce Verification of accounts Right of mortgagee to interest not exceeding 12 per cent. Shall. Makhvn Loll v. Sreekwsen Sing Liability of mortgagee since Act XXVIII of 1855 Zuripeshgee leases Allowance for necessary repairs Improvements how far allowed Payment of Government revenue Mode of taking accounts Liability of mortgagee after notice of subsequent encumbrance Mortgagor not liable to account Mortgagee not a trustee for mortgagor Wassilat distinct from usufruct Mortgagee chargeable with occupation rent Suit for redemption Practice of the Courts in Bengal Procedure in such cases elsewhere . i TABLE OF CONTENTS. Page, LECTURE IX. Liens Legal and Judicial Distinction between Statutory liens Regulation VIII of 1819 and Act VIII of 1869 (B.C.) Act XI of 1859 Salvor's lien- Lien of oo-aharer for revenue paid by him Unpaid vendor's lien Mackreth T. Symmont What constitutes waiver of lien Objections to legal liens Registration Purchasers without notice Practice of English Court of Chancery Purchaser's lien Lien of partners and agents Tenants in common No lien for dower in Mahomedan law None in favor of credi- tors on assets of deceased debtor in Hindu or Mahomedan law Judicial lien Attachment before and after judgment Operation of Sec. 240 of Act VIII of 1859 Alienation by debtor not absolutely void Anund Jiohun Dau against liadha Mohun Shah Striking off attachment Effect of Puddomoney against Roy Mothuranath Choicdhry . 265 LECTURE X. Subrogation Application of rule Rights of puisne incumbrancers Rights of surety Entitled to benefit of securities held by creditor How far discharged by relinquishment of security Security not relinquished by payment Rule of English law Followed in India Co-debtors How far entitled to benefit of securities Purchasers of mortgagor's rights redeem- ing a mortgage, how far entitled to benefit of subrogation Other cases illustrative of the rule Contribution Principle on which founded Doctrine followed in India Marshalling of securities Rule of English law Adopted by our Courts Distinction between purchasers and incum- branceiB Notice immaterial in the case of a mortgage .... 285 LECTURE XI. Pledge of moveablen Paucity of authority Contract Act Definition of pledge Validity of hypothecation of moveables Danger of fraud Distinction between a pledge and a mortgage of chattels Power of ale Pawnee's lien extends to interest and necessary expenses Extra- ordinary expenses Right of pawnee to tack subsequent advances Rule of English law Right of pawnee to make use of pledge Degree of tfence imposed on pawnee Differences between Indian law and English and Roman law on the point Pawnor's right to accessions Right of redemption Passes to the legal representative Possessory heirs General and special Unpaid seller's li.-n May be waived Right of resales Differences between Imliun ami English law Lien of artificers Banker's and attorney's lien for general balance of account ..... TABLE OF CONTENTS. vii Page. LECTURE XII. Extinction of securities Consolidation Merger of debt Right of prior mort- gagee how far extinguished Rule of Roman law Doctrine of English Court of Chancery Conflicting decisions in India Extinction of security by discharge of obligation Novation Substitutionary and cumulative Extinction of security by destruction or sale of pledge or prescription and renunciation Priority Generally determined by order of time How affected by registration Notice immaterial Priority how far affected by possession Rule of Hindu law Privileged liens Salvor's lien Tacking Extent to which recognised in Roman law Doctrine of English law Origin of doctrine Not followed in India Consolidation of securities Rule of English law Partial recognition by our Courts Mortgage to secure future advances How priority is forfeited Fraud, actual or con- structive, of mortgagee Laches Effect of allowing title-deeds to remain in custody of mortgagor Allowing mortgagor to receive rents after notice of incumbrance Deeds of further charge Practice in India Waiver of security not presumed IAS petitions Application of doctrine in relation to priority of securities 315 LECTURE I. Early notions of security Real security, a development of mature jurisprudence Short historical sketch of Roman law of pledge Similar notions traceable in early Hindu and Mahomedan law Classi- fication of securities by Roman lawyers Rights of pledger and pledgee in Roman Law, and in systems founded upon Roman law Mortgages of land in England Rights of mortgagor and mort- gagee Influence of ci vil law. THE history of archaic institutions shows how very slowly the most familiar juridical conceptions of the present day have been matured. Few per- sons, I venture to affirm, would think of question- ing the truth of this assertion at the present day ; and yet even a slight acquaintance with juridical literature will show that it is only recently that wild speculation and rash assertion have given place to sober reasoning and careful observation. Com- parative jurisprudence in a few short years has accomplished many striking results ; but not the least important of these, is the dissipation of the delu- sions which once clustered round the e,arly history of law. Experience, however, tells us that specula- tive errors possess remarkable vitality; and it would be rash to suppose that delusions once so common have wholly died out in our time. The tendency to confound the earlier stages of law with its maturity 2 HINDU WILLS. is by no means uncommon even at the present - clay; and the warning cannot be given too soon, nor repeated too often, that it is only by a careful study of the gradual development of legal concep- tions, that we can guard ourselves against mis- takes into which we should otherwise be almost sure to be betrayed. In common with the class to which they belong, the delusions of which I speak point to modes of thought from which we cannot emancipate ourselves without a conscious effort of the mind. We find it difficult to realize the intellectual condition of society in its infancy, and are frequently betrayed into transferring to archaic law conceptions which find a place in some of the latest improvements in jurisprudence. The history of the Hindu Will furnishes us with a case in point. I do not mean to deny that testamentary succession was known to the Hindu law; but there can, I think, be no reasonable doubt, that we owe the recognition of the institution by English lawyers to the sup- posed analogy between a gift and a bequest The analogy may be very close or merely fanciful. That i> a question which I do not propose to discuss. My object in calling your attention to the topic is merely to point out that an examination of archaic institutions shows, beyond the shadow of a doubt, that testamentary succession belongs to a range of i(1 <' much in advance of that which permits the owner to make a gift of his property during EARLY NOTIONS OP PLEDGE. 3 liis life; and that in no system whatever has the law LECTURE regulating wills grown out of, although it may have sometimes shaped itself on the model of, the rules touching gifts during life. I trust I have said enough to make it unnecessary for me to insist on the interest which attaches to the early history of those legal conceptions which we see only in their maturity. We may not in every case be able to trace the outlines distinctly; but the assertion may be hazarded without rashness that there is not a single juridical conception which may not be historically examined with advantage. A few words therefore on the origin and growth of the law of securities, the immediate subject of the present lectures, will not, I trust, be thrown away. A learned writer on the law of mortgages has said that pledges must have come into use as soon as the rights of property were recognized. This assertion, however, must be received with consider- able reserve. It is true that pledges were known to early law, but the conception when it first shows itself is marked by the crudity peculiar to the infancy of jurisprudence. Let me pause here for a moment to explain that, according to modern notions, the very essence of a security is the right of the creditor to obtain satisfaction, wholly irrespective of the ability or willingness of the debtor. If the debtor make default, the creditor may either sell the property 4 SURVIVALS IN ENGLISH LAW. ami repay himself out of the purchase money, or the pledge is forfeited to him in satisfaction of his demand. The debtor may be obstinate or unable to pay, but the creditor can always obtain satisfaction out of the property pledged to him, and is therefore wholly independent of the debtor. It is, however, only in the maturity of jurisprudence that the pledgee acquires this right; a rii^ht wiliich is justly regarded as the very per- iion of a security. In the infancy of law, a pledge was only regarded as a means of compelling {satisfaction. The creditor, by detaining the pledge, might compel the debtor to fulfil his engagement; but beyond the pressure which the pledgee was thus in a position to put on the pledger, the creditor could not turn his security to account. In other words, a pledge only operated on the will of the debtor. The creditor had no authority to sell the pledge, nor was it ever forfeited to him in discharge of his demand. Modern law furnishes us with an instance of a it closely resembling the right of the pledgee in ancient law. English lawyers have frequently poinn-d out the unsatisfactory character of what is called a -possessory lien" in English law, a bare ut of detention unaccompanied by any power of sale or foreclosure. It is no doubt an anomalous bt; and the true explanation of the anomaly lies in the fact that it is a mere " survival." We have HISTORICAL EXAMINATION OF ROMAN LAW. 5 here an instance, by on means exceptional, in which a LECTURE conception, distinctly archaic, is found to linger in a system which has shown no mean capacity for expansion with the multiplying wants of an active commercial age. I have said that in ancient law a pledge was regarded simply as a means of extorting satisfaction, and that the powers of sale and foreclosure with which we are so familiar at the present day are improvements which are only found in mature juris- prudence. I shall now ask you to test the sound- ness of the conclusion by an examination of a sys- tem of law which, while it has powerfully affected in its maturity the institutions of the greater part of the civilized world, is perhaps also the only sys- tem which possesses a continuous history of this branch of jurisprudence. I allude to Roman law. The evidence furnished by the Hindu and Mahome- dan law is less authentic, and has to be approached with very great caution. I hope however to be able to show in the next lecture, that there are passages as well in our own law as in the Mahome- dan law, which fortify, in a remarkable manner, the conclusions suggested by an historical examination of the Roman system ; passages which can only be explained on the hypothesis that a real security, a security which makes the creditor wholly indepen- dent of the debtor, finds its place in every system among the latest improvements in jurisprudence. REAL SECURITY. i.t:. run law. F.r the present I shall confine myself to the Roman I have not paused to explain with sufficient clear- I the meaning of the words " real security," an ression which I have already used more than once. A real security is a security in which the creditor possesses the right to satisfy his demand out of the property pledged to him, and must be raivi'ullv distinguished from a real right, which, as I shall have occasion to explain more fully hereafter, is simply a right availing against the world at large, and not merely against a determinate ]> rson or persons. A creditor may have a real it in property belonging to his debtor, and yet lie may not possess a real security. Thus, if any body should take out of my possession property on which I have a bare lien, I have a right to have the property brought back into my possession, but my if, the security not being real, does not extend, to Belling the property in satisfaction of my demand. The distinction is a very important one, and must :nlly borne in mind in the discussions in which we shall presently be engaged. n- now turn to the Roman law for the pur- naming the successive steps by which law of securities gradually matured itself. The subject has already been investigated by a living man jurist, and the results of his labours have -ible to English readers by Mr. FIDUCIA AND PIONUS. 7 Justice Markby in his Elements of Law. (See the L Chapter on Securities in the Appendix to the Ele- ments of Law.) The earliest form of security known to the Romans appears to have been the Fiducia. This was a proceeding by which the debtor transferred to the creditor the ownership of the property which was intended to be given as a security; the creditor on his part agreeing to restore it to the debtor as soon as the obligation was fulfilled. If the debtor however made default, his right to the property was not extinguished. To use the language of modern law, the debtor possessed an equity of redemption, of which the creditor could not deprive him, either by sale or foreclosure. I shall pass over, for the present, the successive steps by which the Fiducia ultimately ripened into a real security, and proceed to discuss another mode of giving security ; which, although a later invention, was ultimately destined to replace the Fiducia in the jurisprudence of Rome. This was the " pignus" which, in its earliest form, was a proceeding by which the debtor transferred, not the ownership, as in the Fiducia, but the bare possession, to the creditor. The pledgee only pos- sessed the right of detention. Even this right, however, was at first extremely precarious. It was not protected by a real action, as the law refused to recognise a real right in the creditor. So long -'* ***V .* A W%V* * * ) ' IMPROVEMENTS IN THE ROMAN LAW OF SECURITY, as this was the case, land was rarely given in pledge, as the creditor had no remedy if the debtor made a fraudulent alienation. This was, no doubt, a very unsatisfactory state of things. The law, however, was insensibly developed by the Praetorian jurisdiction to which Roman jurisprudence is in- debted for so many reforms. Under the semblance of moulding the procedure of the courts over which they were called upon to preside, the Roman Tra'tors, by promising to grant a particular action or plea, remodelled almost every branch of the law, and owing to circumstances to which I shall pre- sently refer, the law of security seems to have claimed their attention at an early period. The first improvement was effected by a Praetor named S.-ilvius, who allowed the validity of a pledge, although not followed by a transfer of possession in the case of a tenant pledging his farming stock as security for the rent payable by him. This improvement was followed by the " actio serviana," which allowed the landlord to enforce his claim by a real action, unlettered by the somewhat inconvenient limitations by which the Tractor Salvius had sought to fence in the ri-ht of the landlord to follow the pledge into the hands of third persons. Originally confined to tin- security of the landlord on the farming stock it. the ri-ht was extended in course of """ t() : 'U ' e. s , whatever might be the of the property, and whether the pledge was IMPROVEMENTS IN THE ROMAN LAW OF SECURITY. 9 accompanied by possession or not. The last LECTURE improvement was accomplished by the " quasi Servian action," which marks an important epoch in the history of the Roman law of securities. The jealousy with which archaic law guards the crea- tion of a real right has now been relaxed. A real right may now be created without delivery of possession, and the " substantial pledge has been refined into the invisible rights of a hypotheca." I have said that there were influences at work from without, which, while they hastened the deve- lopment of this branch of the Roman law, also determined, in a great measure, the direction of that development. " The most important improvements in the Roman law of security," says Mr. Justice Markby, " were not introduced until, by the extension of the Roman dominion beyond the confines of Italy, very large estates first became common. From this time large numbers of slaves, and even of free persons, began to be employed in cultivating these properties. Small estates also were sometimes let out to farm. Hence the necessity, that the landlord should have some security for his rent, became apparent at Rome, as it has in all places where the land of one person is cultivated by another. " Under the old law it was not easy for the laud- lord to obtain this security from the cultivator. Generally the only property which the cultivator 10 uicnx OF SALE. had was his farming stock (invecta et illata); and 1 it was obvious that this could neither be assigned to the landlord by a jiducia, nor given into his custody by a pignus. It was, therefore, necessary to devise some other means of effecting security ; and the mode adopted was, to allow the tenant by a simple agreement, without any formalities, to pledge his farming stock to his landlord as a security for the rent." (Elements of Law, 506, 507.) I shall now proceed to state the successive steps bv which the creditor gained a real security, which, as I have already explained, is very different from a real right. This was originally accomplished by the introduction of a clause expressly authorizing a sale upon default, a clause which appears to have been suggested by a right possessed by the State of selling laud pledged to it. At a somewhat later period, this right was presumed to exist in every pledge. The creditor thus acquired the right to . 15/e his money by the sale of the pledge; in other words, the creditor acquired a real security. The power of sale now came to be regarded as a 'it inherent in the pledgee; or as a Roman lawyer :ild perhaps have said, one of the natural inci- dents of a pledge, and it was probably under the influence of this idea that the law at a later period permitted a sale even when the creditor had dy :i'_riv<-d not to exercise the power. have now readied the stage in which the law GRADUAL DEVELOPMENT OP THE FIDUCIA. H stood in the maturity of Roman jurisprudence. The LECTUBE bare right of detention originally possessed by the creditor has now been succeeded by a right of sale, which, as we have seen, could not be controlled even by the express agreement of the parties; while the somewhat cumbrous formalities which were originally necessary to the validity of the " pignus " (including the transfer of possession) have been replaced by a simple agreement of the parties. In giving an account of the Roman law of security, I did not notice, at the proper place, the improvements which took place in the Fiducia* The gradual progress of the Fiducia, from a bare right to compel the debtor to make satisfaction, to its latest improvements, when it ripened into some- thino; like the mort2:ao;e of the English law, or our O O O O ' own conditional sale, is not less interesting than the 7 O development of the kind of securities which I have been hitherto considering. The first improvement was the introduction of a clause, by which it was agreed that the creditor should become, on default, the absolute owner of the property pledged to him. Such a covenant, however, if literally enforced, was likely to operate in many cases with considerable hardship upon the debtor ; and the stringency of the condition was relaxed by subsequent legislation. The default of the debtor was not immediately followed by forfeiture, and he ]2 ABOLITION OF FORECLOSURE. LECTUHE was permitted to redeem, if he fulfilled his obliga- 1 tion, within a reasonable time. The position of the creditor now became analogous to that of the Eng- lish mortgagee, and the conflicting rights of the pledger and pledgee were, to a certain extent, reconciled with justice and equity. Roman lawyers, however, could not bring themselves to accept such an imperfect reconciliation. It offended their sense of "elegance." A pledge, whatever might be the language used by the parties, was only a security for the debt, and the creditor was not m fairness entitled to anything more. In later Roman law, therefore, the creditor was not suffered to foreclose, but could realize his dues only by the sale of the property pledged to him. You will presently see that the English law is also slowly drifting to the same point. The power of directing a sale instead of a foreclosure., which used to be exercised so very sparingly by the English Courts of Equity, has been extended by a recent statute, while other indications are also not wanting that the total abolition of foreclosure is only a question of time. From what I have said, I think it is clear that a real security is the most perfect security. The history of the Roman law shows that it was only very slowly that the right of detainer, the only security recognised in early times, ripened into a 1 security. An examination of Hindu and Maho- medan law also suggests the conclusion that a CLASSIFICATION OF SECURITIES IN ROMAN LAW. 13 security in the infancy of law only operated upon LECTURE the will of the debtor. I shall, however, as I have already said, discuss this point in the next lecture when I propose to give a general outline of the law of security as it is found in Hindu and Mahomedan books. I shall conclude this part of my lecture with a few general observations on the Roman law of security, and I propose, in the first place, to call your attention to the three-fold division of securities by Roman lawyers, a division which although possibly open to criticism on logical grounds, is eminently convenient. Roman law divides securities or mortgages into three classes, conventional, legal, and judicial. A conventional mortgage is one created by the agree- ment, express or implied, of the parties, and calls for no remark. A legal mortgage is one which is created by the operation of the law. A legal mort- gage, however, must not be confounded with implied conventional mortgages, which are really based upon the voluntary consent of the parties, the dis- tinction between the two being precisely the same as that between implied contracts and quasi con- tracts. The judicial lien of the civil law is a lien created by an order of a Court of Justice for the purpose of compelling obedience to its orders, and corresponds to the process of attachment under the procedure of our own Courts. I do not wish to ]4 RIGHTS OP PLEDGEE IN ROMAN LAW. discuss the various rules which governed each of these classes of securities ; such a discussion would be beyond the range of the present lectures. Much of our own law of mortgages is, however, still in a floating condition, and I shall, therefore, be obliged to refer occasionally to the Roman law on topics on which our own law cannot be said to be settled. A few general observations will, therefore, I trust, assist you in following me through some of the dis- cussions in which I shall be engaged in the course of these lectures. The pledgee possessed in later Roman law, as we have already seen, a right to sell the pledge, a right which might be exercised by him even if he had c-i imaged with the debtor not to sell the pledge in satisfaction of his demand. The creditor, however, was not at liberty to sell until his claim was fully due and payable ; and even then he was bound to e the debtor notice of his intention to sell. If, however, the creditor had expressly engaged not to rcise the right of sale, he was bound to issue three successive notices, instead of the one which was ordinarily required by the law. The pledgee \v;is not bound to invoke the process of the Court for the sale of the pledge; but the sale, in the absence of any express agreement to the contrary, nm>t have been effected publicly, and the debtor Miimnom-d to be present. The creditor, however, nt entitled to anything in excess of the RIGHTS OF PLEDGOR AND PLEDGEE. J5 amount of his debt with interest, if any, and costs. LECTUUE If there was any overplus, the debtor was entitled to __1 it, who, on the other hand, was not released from liability if the proceeds fell short of the demand of the creditor. The creditor, however, could not be compelled to sell, unless the debtor gave security for the payment of the debt in full ; but a fraudulent sale rendered the creditor personally liable to the debtor, and if recourse against the creditor was impossible, the purchaser might be compelled to make restitution. If no bidder offered a reasonable price, the creditor might himself obtain an assign- ment of the pledge for a fair price; such an assign- ment, however, did not extinguish the debtor's right of redemption. The debtor, before the exercise of the right of sale by the creditor, was not restrained from dealing with the property in any way he thought proper, pro- vided that the security of the creditor was not there- by impaired. The pledgee could not be affected by any disposition which the pledgor might make of the property pledged by him. The right of the pledgee was a real right, and could not be pre- judiced by any alienation made by the debtor. A sale by the creditor therefore passed the property to the purchaser free of all incumbrances subsequently created by the debtor. It would appear, although the point is not quite free from doubt, that the right of sale could be 1(J PRIORITY OF INCUMBRANCES. LBCTURE exercised only by the first pledgee, and not by the second or any subsequent encumbrancer. It was, however, always open to the puisne pledgee to redeem the prior mortgagee, and thus acquire the ri -:lits of the latter. This right of redemption was not confined to the second mortgagee, but any mortgage creditor might place himself in the situa- tion of the first mortgagee by the payment or deposit of the amount of his demand. The princi- ple of the English law, however, by which a prefer- ence may, in certain cases, be gained over an intermediate incunibrance, was not recognised by Roman lawyers, although the mortgagor was not permitted to redeem without paying to the mort- gagee all the debts, whether secured or unsecured, which might be due to him from the mortgagor. Except in the case of privileged liens, the respec- tive priorities of incumbrances were determined according to the order of time. A privileged lien or pie. din 1 was one to which the law allowed priority upon equitable considerations over pledges older in date. l'.-r instance, the pledgee who, with an express stipu- lation for priority, lent money for the purchase of an e>tatr. <>r who advanced money for the repair of a buildin-. was entitled to priority over encum- brancers whose claims were older in date. There re sonic other privileged liens recognised by the law. but they do not possess much general interest, anil 1 need not. therefore, refer to them in detail. PLEDGES IN CONTINENTAL SYSTEMS OF LAW. 17 Every thing which might be sold, could be LECTURE lawfully mortgaged. Property which could not be the subject of alienation, could not be the subject of mortgage. A mortgage might be either general, that is, it might include the whole of the property which the debtor possessed at the time of the mortgage, or which he might subsequently acquire ; or it might be special, that is, confined to some speci- fic property. A security might be given not only for the repayment of a debt, but also for other considerations. It might, for instance, be granted by the vendor of a property to the purchaser to indemnify him in case he should be evicted. The creditor might be put in possession of the property pledged to him in order that he might satisfy himself out of the rents and profits. Such an agreement, however, was not permitted to be made the means of obtaining usurious interest. The above is also very nearly the law followed at the present day in countries whose jurisprudence is founded on the Civil law. There is, however, one important deviation. The creditor is not permitted by most continental systems to exercise the power of sale except through judicial process. Another depar- ture from the civil law may also be noticed. The hypothecation of moveables, although sanctioned by Roman lawyers, is not permitted in any of the modern systems, which are professedly founded on the Civil law. ENGLISH LAW OF MORTGAGE. There is one other system of law which has a very close interest for the Indian student; and a few words on the English law of mortgages will not, I trust, be thrown away. An English mortgage resembles in its features, as I have already had occasion to remark, the Fiducia of the later Roman law. In form it is a conveyance of land by the debtor to his creditor, with a proviso that, on repay- ment of the debt on a certain day, the conveyance shall be void, or, as is more usually the case, that the creditor shall reconvey the estate to the debtor. If the money is not repaid on the appointed day, the mortgagee becomes at law the absolute owner of the property, but the Court of Chancery, which li:i^ almost exclusive jurisdiction over mortgages, regards the transaction only as a security for the repayment of the debt, and allows the mortgagor to redeem on payment of the principal, interest, and costs within a reasonable time, which is now fixed by statute at twenty years from the date of the entry of the mortgagee, or of an acknowledgment by him of the title of the mortgagor. This right to redeem is known as the "equity of redemption," and as I shall have occasion to explain hereafter, is guarded with peculiar jealousy by the Court. The equity of redemption is not, as the name perhaps would ' ' mm- ri-ht. It is an "estate" in the lanl, and may be. devised, granted, or otherwise by tho mortgagor, subject however to the FORECLOSURE AND SALE. 19 right of the mortgagee to foreclose, when, under the LECTURE decree of foreclosure, the estate passes to the mort- - gagee free of all incumbrances created since the mortgage. At any time after the estate has been forfeited at law, the mortgagee, however, has the right to call upon the mortgagor either to redeem, or, in default, to be for ever foreclosed from redeeming the pro- perty. This is accomplished by a bill of foreclosure, by which the mortgagee prays that an account may be taken of what is due to him on his security ; and that the mortgagor may be decreed, either to pay the amount, by a short day to be appointed by the Court, or to be foreclosed his equity of redemption. An account is taken, and a day for payment is appointed ; the mortgagor being allowed for that purpose six months from the date of the Master's certificate. If the mortgagor make default, the mortgagee obtains an absolute order for foreclosing, and the estate passes from the mortgagor to the morto-ao-ee. A decree of dismissal of a bill for O O redemption by reason of non-payment of money at the time appointed by the Court also operates as a foreclosure. The Court, however, sometimes instead of making a decree for foreclosure, directs a sale of the mort- gaged property, when the purchase money is applied in satisfaction of the mortgage, the surplus, if any, being paid to the mortgagor. In case of a deficiency, .),, ENGLISH LAW OF MORTGAGE. the mort-a-ee may recover the difference from the mortgagor. A recent statute has considerably extended the power of the Court to make a decree for sale instead of a foreclosure, but the rule of the later Roman law, by which a foreclosure > never permitted, has not yet been adopted in England. O A mortgagee has not only the right to foreclose, but he mav proceed to enforce at the same moment all the remedies to which, according to the nature of his security, he may be entitled. He may sue at the same time on his bond or covenant, bring his ejectment, and file his bill of foreclosure. If, how- ever, the mortgagee should enter upon possession before foreclosure, he will be bound to account to the mortgagor for the rents and profits, while an action on the covenant will have the effect of open- . the decree for foreclosure, that is of letting in the mortgagor to redeem on the usual terms. I have already explained that after the mortgage has been forfeited by non-payment of principal or interest, the mortgagee is regarded as the absolute owner of the estate at law. He may, therefore, <-nter upon possession, but Equity will compel him to account for < very farthing of the rents and pro- re;ili/..d by him out of the estate. nrse for the mortgagee, when there ;! the mortgagee is bound to give at least six months' notice in writing to the person or one of the SODfl entitled to the property subject to the charge. When the power of sale is conferred expressly by -iniment of mortgage, there is generally a provision to the effect that the power is not to be <1 until the expiration of a previous notice t<> i jor. The m is regarded as a fiduciary vendor ami is bound to adopt every precaution which would takrn by a prudent owner to get the best price '"' -titution; and although the rules of ruing succession to property, flic CONFLICTING AUTHORITIES IN HINDU LAW. 25 punishment of offences, and the ceremonies of reli- LECTURE gion are widely different from ours, yet, in the great - system of contracts, and the common intercourse between man and man, the Pootee of the Indians and the Digest of the Romans are by no means dissimilar." The law, however, which moved the admiration of Sir William Jones has ceased, in one sense, to be living law, and it is to be sought at the present day not in our books of reports, but in the texts of our sages and in the writings of the suc- cessive jurisconsults by whom Hindu law was gradually moulded into system. It is to that law, the truly indigenous system of the country, that I propose to call your attention in the present lecture. I must, however, warn you at the outset that it is by no means easy to thread one's way through the labyrinth of conflicting texts in which the law is sometimes involved. I intend to confine myself only to some of the broader features of this branch of Hindu jurisprudence. But even with this limitation, I cannot but feel a certain degree of distrust in the soundness of my conclusions, a distrust, I may venture to say, without presump- tion, perhaps inseparable from the nature of the inquiry upon which we are now engaged. I have already said that the authorities upon which our conclusions must mainly rest are not unfrequently conflicting. The key to this conflict 2(J DEVELOPMENT OF HINDU LAW. Latmnu! is to be sought in the fact that we have to trust to texts which, although sometimes placed side by side, are of various antiquity, a fact which must be carefully borne in mind by the student of Hin- du law. Whatever truth there may be in the reproach that the Hindus are an unprogressive race, even the most careless student of our law must admit that the charge must be received with considerable reservation. Hindu law is, no doubt, archaic, but there are portions of it which furnish unmistakcable evidence of maturity. A not very friendly critic has said : " There is in truth but little doubt that, until education began to cause the natives of India to absorb Western ideas for them- selves, the influence of the English rather retarded than hastened the mental development of the race. There are several departments of thought in which a slow modification of primitive notions and conse- quent alteration of practice may be seen to have been proceeding before we entered the country; but the signs of such change are exceptionally clear in jurisprudence, so far, that is to say, as Hindu jurisprudence has been codified. Hindu law is, theoretically, contained in Maim, but it is practi- cally collected from the writings of the jurists who li:ive commented on him, and on one another." ine's Village Communities, page 46.) In examining Hindu law, we must, I repeat, iv (li-tiiiLiui.-li the rudimentary stages of COMPARATIVE JURISPRUDENCE. 27 legal thought from its maturity ; and it is because LECTURE this has not always been done, that Hindu law has - attracted to itself a cloud of undeserved prejudice. It may be said that it is not always possible to obtain direct evidence of the relative antiquity of the texts of Hindu law; but in this, as in other instances, a knowledge of comparative jurispru- dence will, I am sure, greatly assist us in " unravel- ling the tangled skein " of legal history. Com- parative jurisprudence is to the lawyer what com- parative grammar is to the philologist; and if the results yielded by the latter are more certain, it is only because its inductions are founded upon a wider basis. The conjecture, however, may be hazarded without rashness or presumption, that Hindu law will, at no distant date, render the same service to jurisprudence that Sanskrit has already done to the sister science of philology. I will illustrate my position by reference to a question connected with the Hindu law of securities which has provoked no little conflict of opinion. We saw that in Roman law a pledge was origi- nally required to be accompanied by possession, and that it was only very gradually that hypothe- cation found a place in the j urisprudence of Rome. In the case of Shib Cliunder Ghose v. Russick Chunder Neogy (Fulton's Reports, p. 36), the question arose, whether a pledge unaccompanied by possession was valid according to Hindu law. 2g VALIDITY OP HYPOTHECATION. LECTURE Conflicting texts were cited in the argument. The plaintiff relied upon the text of Brihasputty, " Of him who does not enjoy a pledge, nor possess it, nor claim it on evidence, the written contract for a pledge is nugatory, like a bond when the debtor and wit- nesses are dead." The defendant relied upon the text of Naroda : " By the acceptance or actual possession of a pledge the validity of the contract is maintained." " Pledges are declared to be of two sorts, immoveable and moveable, and both are valid when there is actual enjoyment, and not otherwise" The Judges were divided in opinion; but the major- ity of the Court held that whatever might have been the case in early times, the later Hindu law clearly sanctioned the validity of a pledge although unaccompanied by possession; and they relied as well upon some of the written texts of Hindu law as upon the general usage of the country. Mr. Justice Grant, however, was of a different opinion, and I shall presently call your attention to the reasons given by the learned Judge as a striking illustration of the delusions which had at one time crystallized round the so-called "law of nature ;" but before I do so I must enter upon a discussion, which may perhaps at first sight seem to be some- what outside the range of the present lectures; but which a closer examination will, I trust, show to be relevant. I allude to the important part played by tradition in early law. REAL AND PERSONAL RIGHTS. 29 It seems that in the rudimentary stages of legal LECTUBE thought there was no distinction between a contract - and a conveyance. Sir Henry Maine has shown that, in the Roman law, contracts, as well as transfers, were originally known by the same name, and were accompanied by the same formalities. In course of time, however, the notion of a contract disengages itself from the notion of a conveyance, and then we have the well-known distinction between " real" and " personal" rights. (Ancient Law, Chap. IX.) A " real right," or jus in rem, is, as you are aware, a right availing against the world at large; while a "personal right" (jus ad rem} is a right availing only against some determinate person or persons. Take the case of an executory contract of sale. If, for instance, A agree to sell a parcel of land to B, B acquires a personal right against A to compel him to fulfil his contract ; or if that is impossible, B can compel A to compensate him for the breach. B, how- ever, has no right whatever against third persons who may withhold the land from him. The right is a per- sonal right, arising out of an agreement. But if A, in pursuance of the contract, convey the land to B, B is said to acquire a real right, which he can assert against third persons. Now in archaic law there could be no valid conveyance unless accompanied by tradition. Possession was, therefore, an essential element in the acquisition of a real right. Various explanations have been suggested of the origin of 30 IMPORTANCE OF TRADITION IN ARCHAIC LAW. LECTURE this rule. But whatever might be the origin of the - rule, there can he very little doubt that it was retained in almost every system of law, because it served a useful purpose. As a conveyance trans- ferred a real right it was very desirable that it should take place openly, and change of possession was, perhaps, best calculated to accomplish that object. The inconvenience of the proceeding, however, must have suggested the gradual relaxation of the rule; and in the maturity of jurisprudence tradition loses its original importance, and is almost everywhere, in time, replaced by a system of registration of titles. It has been thrown out by a learned writer that the first relaxation probably took place in the case of mortgages, and an examination of the Roman law certainly shows that, in the Western world at any rate, this was the case. The Roman j>r;ctors, in recognising the validity of a hypothe- cation, broke in upon what I may call the rule of the common law, a rule which was retained in Roman jurisprudence to the last, by which no real right could pass without tradition. It is not possible to say whether precisely the same course of develop- ment was followed by the Hindu law. There can, however, l)e little doubt that in mature Hindu law the rule requiring tradition had fallen into disuse, and that a real ri-ht, whether by mortgage or sale, could be conform! by a mere expression of the intention of the parties. A close examination of the subject MITACSHARA ON " CORPOREAL ACCEPTANCE." 31 would be beyond the scope of the present lectures; LECTUBE and I shall content myself only with citing a passage from the Mitacshara which shows the state of the Hindu law on the point. " The acceptance of gold, cloths, &c., being completed by the ceremony of bestowing water, and falling, therefore, under either of the means, may be designated as a three-fold acceptance ; but in the case of land, as there can be no corporeal acceptance without enjoyment of the produce, it must be accompanied by some little possession, otherwise the gift, sale, or other transfer is not complete. A title, therefore, without cor- poreal acceptance, consisting of the enjoyment of the produce, is weaker than a title accompanied by it, or with such corporeal acceptance. But such is the case only when of these two the priority is undistinguishable ; but when it is ascertained which is first in point of date, and which posteriory then the simple prior title affords the stronger evidence" (Macnaghten's Hindu Law, Vol I, pp. 218-219.) I have dwelt at some length upon the subject, because Hindu law cannot be properly understood without some general knowledge of comparative jurisprudence, which alone can furnish us witli a key to the apparent conflict in our written law. In the digest of Juggannath, side by side with texts which belong to the infancy of law, we find others which belong to a much more advanced stage of legal thought. Our knowledge of the gradual 32 SHIBCHUNDER CHOSE V. RUSSICKCHUNDER NEOGT. I.I:.-TUBE progress of law in the Western world will, however, '- enable us to determine with tolerable certainty the historical order of the different authorities upon which our conclusions must rest. The inductions of comparative jurisprudence are as yet, no doubt, founded upon a limited basis, but I may safely ven- ture to affirm that the written texts of Hindu law, which require the delivery of possession by the mortgagor to the mortgagee, are older than those which do not insist upon tradition. It seems to me, with very great deference, that this simple fact is not sufficiently attended to by Mr. Justice Grant in his elaborate judgment in the case of Shib Chunder Ghose v. Russick CJiunder Neogy, in which this question was fully discussed. In that case Mr. Justice Grant is reported to have said : "In questions, therefore, which concern the laws of countries into which the feudal law has not been introduced, it is of importance to begin by ascer- taining what the Roman law was upon those ques- tions, because it is the best digest of the rules which affect the rights and obligations of mankind according to the natural principles common to all nations. If we find the law laid down in any ttise upon the subject which is in question, con- formablc to the principles of the Jus gentium stated in the Konian law, we are entitled to believe that it is correctly laid down. If we find it declared to be otherwise, \ve arc driven to search for some ROMAN LAW OP PLEDGE. 33 reason in the circumstances of the people which LECTUBM shall account for their institutions in that matter - differing from those of the rest of mankind. If we find authorities in their law differing and equally balanced, we must believe those to be correct which agree with the general principles of natural law still more if we find the majority agreeing with those principles and expressing themselves clearly, and the minority apparently differing from them and expressing themselves more obscurely and less decidedly." Mr. Justice Grant then proceeds to examine what he calls the general principles of natural law as they are to be found in the Roman law. After stating that there could be no valid pledge without possession, the learned Judge, referring to the hypothecation of the later Roman law, says : " The Jus hypothecce was limited to certain securities, chiefly, if not solely, over moveable property, and to certain cases, and under certain regulations, afforded by the equity of the praetor. It was pactum prcetorium not arising out of general princi- ples of law, or forming part of their common law, or jus non scriptum, but a municipal institution intro- duced by that magistrate. Puffendorff confines this security of pledge expressly to the giving the creditor some certain thing in pawn till the debt be paid, and, considers the hypotheck of the Romans to have been confined to mnnoveable property. " The 34 LAW OF NATURE. LBCTUBK distinction," says Sir William Jones, " between - j)ledging where possession is transferred to the cre- ditor, and hypothecation where it remains with the debtor, was originally derived from the Attick law." In what circumstance the Athenians admitted the hypothecation, we do not know. But that with them, as with the Romans, delivery of possession was necessary to constitute pledge by what we may call their common law, there seems no doubt. This, therefore, was the law of the whole ancient world of civilized Europe, extending as well to immoveable as to moveable property secundum jus gentium. And it is also the law of the whole of modern Europe in regard to moveables." (Fulton's Reports, page 36.) The learned Judge, therefore, comes to the conclusion that tradition is necessary to the validity of a pledge in Hindu law, a conclu- sion which we are told is in conformity with " the general principles of natural law." If it were not for the peculiar views about the law of nature so widely prevalent at one time, Mr. Justice Grant could hardly have failed to perceive that the Hindu law might have been developed in course of time in the same manner as the Roman law was developed by the introduction of the hypothecation. We have lit-re an instance of juridical improvements in the A AVst repeating themselves in India. W- have seen how in one respect the Hindu law slowly matured itself. 1 will now proceed to discuss TEXT OF MANU. 35 another question which has also given rise to consi- LECTUBK derable conflict of opinion, a conflict which has - added not a little to the evil reputation for uncer- tainty which the Hindu law has acquired. We saw in the last lecture that in the Western world a security was originally regarded only as a means of compelling the debtor to fulfil his engage- ment, and that it was only very slowly that Roman jurisprudence emancipated itself from this concep- tion. The questions naturally suggest themselves, was there any analogous movement in Hindu law? Are there any traces in Hindu law of the primitive notions of a security ? Now an examination of our law shows, as I have already said, that a real security was comparatively a late development of Hindu jurisprudence. The earliest record of Hin- du law which we possess discloses that stage of legal thought in which a security is limited to a bare right of detention. Manu says, " Whatever the length of time, a pledge may neither be sold nor assigned by the pledgee." Here we find the very same restrictions upon the rights of the creditor as we found in early Roman law. In course of time, however, these restrictions were withdrawn, and the security of the pledgee in Hindu law became a true real security. The change was accomplished by the successive jurisconsults, by whom, in the absence of direct legislation, the improvement of our law was carried on. The authority of Maun 36 CLASSIFICATION OF SECURITIES IN LATER HINDU LAW. LZCTCBE is never openly disowned, and yet we find in the 1 mature Hindu jurisprudence the rule laid down in the code reduced to very narrow limits; the dictum of Manu being confined to the single case of a pledge in which the creditor is permitted to receive the profits in lieu of interest, and the right to redeem the pledge is by the express agreement of the parties unlimited as to time. In order to explain mvself I ought to state that, in the later Hindu law, a pledge might either be limited as to time or for an indefinite time. It might also either be a pledge for use, or for mere custody. In the pledge for a limited time, the property, by the express terms of the agreement, passed to the creditor on default. Jn the pledge for use no interest was permitted to be taken by the creditor in addition to the usufruct. It is not necessary to discuss any of the rules peculiar to each of these classes. All that I wish to observe is, that the division of securities into pledges for a limited period, and pledges for an indefinite time, marks an advanced stage of juridical thought. No trace of any such classification is to be found in Maim, although the distinction between beneficial pledges and pledges for custody is pointed out in the code. In the maturity of Hindu jurisprudence the creditor possessed a real security in every case in which the pledge was for a limited period, and in some cases also where tin- pli-dgo was for an indefinite time. In the case of a pledge for an indefinite time, if the EIGHT OP DETENTION REPLACED BY REAL SECURITY. 37 pledge was one for custody only, the property LECTUKE passed to the creditor when the debt had doubled itself, the rule of Hindu law prohibiting the accumulation of interest exceeding the principal. The law, however, went a step further when it allowed the creditor to sell the pledge and repay himself out of the proceeds even when a forfeiture was guarded against by the express stipulations of the parties. The pledgee was entitled to exercise this right if the pledge happened to be of the class known as a pledge for custody and the debtor failed to redeem after the interest had become equal to the principal. It would seem that in the last case the creditor only possessed the right to sell the pledge. In every other case a sale was entirely in the option of the mortgagor. The foregoing sketch shows how a pledge in Hindu law limited by Manu to a bare right of deten- tion ripened in course of time into a true real security. This was accomplished by a series of limitations imposed upon the very broad proposition which we find in the code. It is not always pos- sible to trace the successive stages of the progress of the Hindu law; but in the present case, I think, the task can be accomplished with tolerable certainty. The first improvement appears to have been the introduction of a clause by which the debtor agreed to the property in the pledge passing to the creditor upon default. The division of 38 IMPROVEMENTS IN HINDU LAW OP SECURITY. LBCTUBE pledges which we find in the later Hindu law into pledges for a limited and pledges for an unlimited period, is nowhere alluded to by Manu, and there can I think be but little doubt that the classi- fication denotes a very great advance in legal thought. Partly by calling in this distinction, and partly by help of the distinction between pledges for use and those for mere security, the successive commentators cut down the rights of the pledger to what I will venture to call the most reasonable limits. The commentators, who, as I have already said, always professed the very greatest veneration for the text of the code, explained the dictum of Manu as having reference only to cases in which there was no express agree- ment that the pledge should be forfeited on default. This was the first of the series of limitations by which the application of the text of Manu was gradually narrowed. Chandeswara, Bachespati, Bhavudeva, all concur in the opinion that the text applies only to a pledge in which there is no special agreement by which the right of the debtor is liable to forfeiture. It was not long before the law was further developed. The process by which this iras accomplished was by presuming the existence of a clause of forfeiture when the debt doubled If in the case of a pledge for custody. The text of Maim was now narrowed down by an ingenious construction only to the single case of a beneficial DISCUSSION IN THE MITACSHARA. 39 pledge in which no time was limited for redemption. LEG-ITU; I have, however, passed over an intermediate stage in the development of the law in which the pledgee for custody was entitled to use the pledge after the accumulation of interest to the extent permitted by the law. The latest improvement, as I have already said, consisted in the right which the law gave to the creditor to sell the pledge even when there was an express stipulation that the property should not be forfeited although the debt was doubled. I shall now call your attention to a discussion in the Mitac- sliara, which, while it confirms the truth of the proposition that a real security was a late product of Hindu jurisprudence, offers an apt illustration of the method of interpretation followed by Hindu commentators. Referring to the text of Brihasputty, " Gold having doubled, and the stipulated period having expired, the creditor becomes owner of the pledge after the lapse of fourteen days. If the debtor repays the amount within the time, he shall get back the pledge," the author of the Mitacshara says " A question arises that the pledge is forfeited is not consistent, because there is neither a gift nor sale, &c., by which the right of the debtor can cease ; neither is there an acceptance, nor purchase, &c., by which the right of the creditor can accrue ; and that it is also contrary to the text of Manu." "However long the time may be" means for whatever length of time the pledge has been in the 40 COMMENTARIES ON THE TEXT OP MANU. LECTI-RE custody of the pledgee. "Assigned," pledged to a third person by the pledgee. Hence, by the prohibition of assignment and sale, it is evident that the right of the pledgee does not accrue. Answered. It is a well known popular notion that a transfer by pledge is a qualified cause of the loss of right; and acceptance of the pledge, a qualified cause of the creation of right. Consequently, after the debt has doubled, and the stipulated time has arrived, the right to satisfy the debt ceases, and by virtue of this text the debtor's right is lost for ever, and that of the creditor accrues. Nor is it contrary to the text of Manu " after no length of time neither :ui assignment nor a sale of the pledge can be made." For this is said by the sage (Manu) on the subject of a pledge for use, as he commences by ving, " if he take a beneficial pledge, he must have no other interest on the loan." You will remember that the passage in Manu was expounded by the earlier commentators as apply- ing only to pledges whether for use or custody, where there was no express agreement that the property should be forfeited on default. Hindu law, however, had advanced since that time; and onlin-ly we find the author of the Mitacshara placing a still more restricted interpretation on the ' of Manu. This was the way in which Hindu law was gradually improved under conditions which tiuly not very favourable to progress. HINDU LAW OF PLEDGE IN ITS MATURITY. 41 Referring to the development of law by successive LECTUBB comments by jurisconsult upon jurisconsult, Sir Henry Maine says : " Even so obstinate a subject- matter as Hindu law, was visibly changed by it for the better. No doubt the dominant object of each successive Hindu commentator is so to construe each rule of Civil law as to make it appear that there is some sacerdotal reason for it;, but subject to this controlling aim, each of them leaves in the law, after he lias explained it, a stronger dose of common sense and a larger element of equity and reasonableness than he found in it as it came from the hands of his predecessors." (Village Communi- ties, p. 45.) We have now arrived at the state in which the Hindu law stood in its maturity. We find that if the debtor committed default,, the property in the pledge passed to the creditor, who might, however, in the exercise of his discretion, sell the pledge ; when, if there was a surplus, the debtor became entitled to it. In the case, however, of a pledge, for custody, where there was an express stipulation against forfeiture, the creditor could not foreclose, but could only exercise the right of sale. The only case in which there could be neither a sale nor a foreclosure, was when the pledge was of the descrip- tion known as a " beneficial pledge," and the right of redemption was by the express agreement of the parties not limited to any particular period. 42 SALE BY JUDICIAL PROCESS. LECTURE The creditor was in no danger of losing his interest, - and the law, therefore, left him to the terms of his contract with the debtor. It would seem that, under the Hindu law, the mortgagee could not sell the pledge except through judicial process. Brihasputty says : " When the pawner is missing let the creditor produce his pledge before the king ; it may then be sold with his permission: this is a settled rule. Receiving the principal with interest, he must deposit the surplus with the king." This text, therefore, shows that the creditor was not entitled to sell the pledge of his own authority. We have already seen that, in later Hindu law, it was not necessary that a pledge should be accom- panied by possession. It must not, however, be supposed that a mort- gagee who had omitted to take possession was L'xactly in the situation of one who had taken the precaution of publishing the mortgage, if I may use the expression, by taking possession of the property pledged to him. Whenever any question of priority arose, the mortgagee in possession, though hi>- mortgage might be later in date, was always pn-ti-nvd to the mortgagee who had neglected to iMiti-r upon possession. " If two men, to whom the x m it.- property has been pledged, enter into a con- to him who lias possessed the land it shall if no force were used." (Smriti, cited DRISTI BANDHAK. 43 iu the Ratnacara ; Colebrooke's Digest, Vol. T, LECTURE p. 217.) It would seem from the use of the expression " without force," that the possession must be acquired in good faith, and the text seems to limit the preferable right of the puisne incumbrancer in possession only when the money has been advanced without notice of the prior mortgage. While upon this subject a few words on a kind of mortgage very common in the Southern and Western Presidencies may not be thrown away. This is the Dristi Bandhak, or a mortgage of visible things. In this kind of mortgage, the mortgagor remains in possession till default is made by him, when the mortgagee becomes entitled to enter upon possession as absolute owner of the property. It is with reference to this class of mortgages that Sir William Strange says : " It may be doubted whether this mode of pledging be not originally Hindu instead of Attic as has been supposed." The existence of this class of mortgages shows very clearly that Hindu law had long outgrown that stage of juridical thought in which tradition is regarded as essential to the constitution of a mort- O gage. I have already shown how, in certain cases , the priority of mortgages was determined by possession. I shall now state some other rules governing prio- rity in Hindu law. A mortgage in writing was 44 RULES GOVERNING PRIORITY. TUBE preferred to a parol mortgage. " If a pledge, a - sale, or a gift of the same thing be alleged to be made before witnesses to one man, and by a written instrument to another, the writing shall prevail over the oral testimony, because one contract only is maintained. (Smriti, Colebrooke's Digest, Vol. I, pages 220-21.) Another rule is to be found by which a writing in which the property mortgaged is clearly defined, is preferred to one in which there is no such specification of the property intended to be pledged. (1.) "But, if a man first mortgage land without noticing all circumstances, and afterwards O ' mortgage it with express description by name and the like, that writing which contains an express distinction shall prevail." " If a field or a house be described in a written instrument by its limits, and it' villages and the like be so described, the contract is valid." When a distinction is expressed in a writing to one man, and no distinction to another, the express distinction, says Catyayana, shall pre- ponderate. (Smriti, Colebrooke's Digest, Vol. I, I-. -2-2'2.) A general hypothecation does not seem to have- bfcn recognised by the Hindu law. A text cited i" the Di- "If a man pledge his property unezhibited and undescribed as to its nature, and (Msoijuriitly imperceptible like the subtile element, that shall not bo considered as a definite pledge." lebrook Vol. I, p. 225.) There are one \\o more points in connection with Hindu law DESTRUCTION OF PLEDGE. 45 which deserve notice. "Mortgaged land," says 1,1.,, u Yagnyawalcya, " being carried away by a rapid stream, or being seized by the king, another pledge of land must be delivered, or the sum lent must be restored to the lender." (Colebrooke's Digest, Vol. I, p. 168.) Similarly, Catyayana says, '" Whatever pledge has been lost by the act of God or the king, the debt for which it was given shall be paid by the debtor to the creditor with interest." (Colebrooke's Digest, Vol. I, pp. 169 & 170.) Brihasputty also says, " If a pledge be destroyed by the act of God or of the king, the creditor shall either obtain another pledge, or receive the sum lent together with interest." Narada says, " When a pledge, though carefully preserved, is spoiled in course of time, another pledge must be delivered, or the amount of principal and interest must be paid to the creditor. (Colebrooke's Digest, Vol. I, pp. 165 & 166.) An analogous rule is to be found in the French Code, Article 2131, which says: "In like manner, in case the present immoveable or immoveables, subjected to mortgage, have perished, or sustained deterioration, in such manner that they have become insufficient for the security of the creditor, the latter shall be permitted either to sue immediately for repayment or to obtain an additional mortgage." The Hindu law did not permit the redemption of a usufructuary mortgage for a limited period 40 RIGHTS OF MORTGAGOR. LECTURE before the expiration of the term. The rights of 1 the mortgagor are, no doubt, guarded with scrupu- lous care, but the sentimental tenderness for the debtor, which sometimes overlooks the just rights of the creditor, finds no place in our ancient law. " When a house or field, mortgaged for use," says Brihasputty, "has not been held to the close of its term, neither can the debtor obtain his pro- perty, nor the creditor obtain the debt." The law- giver, however, adds, "After the period is com- pleted, the right of both to their respective property is ordained ; but, even while it is unexpired, they may restore their property to each other by mutual consent." (Colebrooke's Digest, Vol. I, p. 199.) I shall conclude with a few observations on the general rights of the mortgagor. The mortgagor, notwithstanding the mortgage, could deal with the property as owner subject to the limitation that he was not permitted to do anything which might impair the security of the mortgagee. He could make a gift or sale of the property, and the trans- feree would, in either case, have the right to redeem the mortgage. Raghunandana, in his Dayatutwa, MI vs, " Thus also if the pledge be not redeemed by iva.son df death or the like of the seller or donor, it may be redeemed by the buyer or donee, because a ri-ht equal to that of the former owner has been rated by the sale or gift. In such a case if a arise as to the source of the right, then the FRAUDULENT SECOND MORTGAGE. 47 buyer or the donee (who is admitted as such) is LECTUEE required to prove his possession, and not the com- mencement of his title." (Dayatatwa, Translated by Golap Chunder Sirkar Sastri, sec. 16, p. 32.) The passage is also interesting as showing that hypothecation was a common mode of mortgaging property, at least in Bengal, in the sixteenth century. A text of Vishnu is sometimes cited to show that a second mortgage was not permitted by the Hindu law. " He who has mortgaged," says Vishnu, " even a bull's hide of land to one creditor, and without having redeemed it, mortgages it to another, shall be corporally punished by whipping or imprisonment ; if the quantity be less, he shall pay a fine of sixteen suvernas" (Colebrooke's Digest, Vol. I, p. 216.) The text would seem to point to a fraudulent second mortgage executed by the debtor without disclosing the prior mortgage, a fraud which the Hindu law, in common with other systems, is careful to guard against. The reasoning of the Bengal lawyer would seem to show that no exception could be taken to a second mortgage honestly created by the debtor ; while the extremely severe penalty attached to a violation of the duty which the text imposes on the mortgagor, also points to the same conclusion. I have now brought down the history of Hindu law to its maturity. I regret that the limits I am obliged to propose to myself will not permit a 48 HINDU LAW OF SECURITY. LECTURE fuller account. The Hindu law of security however ii. deserves very careful study, and I trust I shall not be accused of an idle pride in my own national system if I venture to affirm that although not quite so perfect as the Roman law, it is still on the whole a model of good sense and logical consistency. LECTURE I }. (Continued.; Mahomedan Law of Mortgage Difference between Mahomedan Law and Hindu and English Law Rakn, literally detention Pledge inva- lid unless followed by transfer of possession Things capable of being pledged Those of which possession could be delivered Things which could be sold, but of which possession could not be given, could not be pledged Opinion of Shafei Pledge for con- tingent debt Liability of pledgee for loss or destruction of pledge Interest unlawful Influence of rule in retarding development of law of pledge Qualified power of sale Must be given by contract itself Bye-bil-waffa, a comparatively modern innovation Conflicting opinions of Mahomedan lawyers as to its legality Opi- nion of Mahomedan law officer in Bussunt Ally's case. Recognition of validity of Bye-bil-waffas in India Gradual recognition of hypo- thecation Probable influence of Hindu Law No distinction between pledges of land and pledges of moveables Moveables, originally the subject of pledge Gradual extension of pledge of land Hypothecation. I WILL now proceed to give a short outline of the Mahomedan law of securities. The Mahomedan law, however, to which I propose to call your atten- tion in this lecture, is not the law which is adminis- tered at the present day by our Courts of Justice, but that which is to be found in the authoritative treatises of Mahomedan doctors. Mahomedan law has, no doubt, made great progress since ; but in the process it has lost all its distinctive features, and there could, I apprehend, be no better proof of 50 ANALOGY BETWEEN MAHOMEDAN AND ROMAN LAW. LECTUBE this than the fact that, according to the law as _ administered in Bengal and the North- Western Provinces, at any rate, the respective rights of mortgagor and mortgagee are the same, whether o o o o * the parties are Hindus or Mahomedans. The process which Mahomedan law underwent in India may be described as one of gradual assimilation to the Hindu law. There is one feature of Mahomedan law which distinguishes it as well from the Hindu as from the English law. We saw that in both the latter systems, the ownership of the property mortgaged is liable to pass to the creditor on the failure of the debtor to repay the loan by the appointed time. The transfer is the result of the agreement of the O parties, by which the debtor renounces his right to the pledge upon default. In the Roman law, how- ever, we found that another kind of security was invented at a very early period, by which the posses- sion only was transferred to the creditor. This kind of security, as I told you, had a very great fortune in Roman law. It displaced the older form of secu- rity, and the respective rights and duties of the pledger and pledgee were moulded on principles altogether different from those which have obtained in systems in which a conditional transfer of owner- si tip is the recognised mode of giving security. In the later Roman law, the ownership never passed t" the creditor upon default, lie was only autho- PLEDGE AS DEFINED IN THE HEDATA. 51 rised to sell the pledge and satisfy his debt out of LECTUBE the proceeds. Now the pledge of the strict Maho- - medan law resembles very closely the pignus of the Civil law. The creditor is not permitted to become the owner of the pledge. His right is confined with certain limitations to be presently noticed to the sale of the pledge, when, if there is a surplus, the debtor becomes entitled to it. It is true that the ingenuity of Mahomedan lawyers soon invented another kind of security analogous to the fiducia of the Roman and the mortgage of the English law. But there cannot be the shadow of a doubt that the early Mahomedan law did not recognise any other kind of security than the Rahn, to which I now propose to address myself. A pledge in Mahomedan law, as signified by its name (Rahn), is defined in the Hedaya as "the detention of a thing on account of a claim which may be answered by means of that thing, as in the case of debts." (Hedaya, Vol. IV, p. 189.) There is a good deal of discussion in the Mahomedan books as to the necessity of possession to the validity of a pledge, but the better opinion seems to be that a pledge is not valid unless accompanied by possession. It is said in the Hedaya that " until the seizin actually take place, the pawner is at full liberty either to adhere to, or recede from, the agreement, as the validity of it rests entirely upon the seizin, without which the end and intention of 52 ARCHAIC NOTIONS OF PLEDGE. LBCTUBE a pledge cannot be answered." (Hedaya, Vol. IV, p. 190.) In these words you cannot fail to perceive the very same primitive notions which are traceable in early Hindu and Roman jurisprudence. It is also clear that the Mahomedan law had not ceased to be under the dominion of archaic notions when the Hedaya was compiled. The conflicting dicta, however, which are collected by the author, show that the process of emancipation had already com- menced, and, it may be presumed, was accelerated by the Hindu law, with which it came into contact in India. Possession being thus essential to the validity of a pledge, it followed as a corollary that things of which there could be no delivery of possession according to Mahomedan notions, could not be given in pledge. Thus, an undivided share in any pro- perty, whether moveable or immoveable, could not be lawfully pledged. One eminent Mahomedan lawyer, indeed, who seems to have entertained sounder notions on the subject, maintains a contrary opinion; but the weight of authority is opposed to his view. The discussion on this point in the Hedaya shows a conflict between archaic notions and modern ideas, which is extremely interesting. " It is unlawful," says the author of the Hedaya, "to pawn an indefinite part of anything. Shafei maintains that it is lawful. On behalf of our doctors two reasons are urged. First, this disagreement RIGHTS OF PLEDGOR AND PLEDGEE. 53 arises from the difference of opinion regarding the LECTURE object of pledges; for, according to us, pledges are '- taken to be detained, with a view to obtain payment of a debt, which cannot be effected in case the pledge be an undefined part of property; because a seizin of things of that nature cannot be made, a real seizin being only practicable with respect to things which are defined and distinguished where- as, according to Shafei, the object of pledges is that the pawnee may sell them to effect a discharge of his debt ; and with this object pledges of the nature above mentioned are not in any shape inconsistent. Secondly, it is an essential part of the contract of pawn, that the pledge be constantly detained in the hands of the pawnee until the redemption of it by the pawner a condition which cannot be ful- filled with respect to pledges of the above nature ; for, in such cases, it would be necessary that the pawner and the pawnee have possession of the article alternately, whence it would be the same as if the pawner were to say to the pawnee, " I pawn it to you every other day ;" as, therefore, a constant detention is in such case impossible, it follows that the pledge of an undefined part of anything, whether capable of division or incapable, is illegal." (Hedaya, Vol. IY, p. 192.) I shall now proceed to consider the rights of the pledgee in Mahomedan law. I propose to place before you only some of the broader principles, as 54 RIGHTS OF PLEDGOR AND PLEDGEE. LECTUBE the details do not possess much interest. The 1 pledgee had the right to sell the pledge on default, but only when the right was given by the contract itself. He was then regarded as the agent of the debtor, but the authority upon principles recognised in every system of law was not revocable. It was not necessary that the authority should be given to the creditor himself. It mi^ht be given to a third <*j o person, who might be compelled by the Court to exercise the power. A sale, however, through judicial intervention seems to have been unknown, and the Kazee could only compel a person who had been invested with the power of sale to exercise it for the benefit of the creditor. If the power of sale was not given by the original con- tract, the pledgee had only a bare lien, without the right of getting material satisfaction out of the pledge. In the Mahomedan law, the debtor was not authorised to deal in any way with the property pledged by him ; and a sale without the consent of the creditor was invalid. If, notwithstanding, the debtor sold the property to two persons in succession, the person who was recognised as the purchaser by the pledgee, acquired a preferable right to the property, although the sale to him might be posterior in point of time. The rule of the Mahomedan law regarding the liability of the pledgee for the destruction of the MAHOMEDAN LAW OF PLEDGE. 55 pledge, even when the destruction is accidental, LECTURE is somewhat peculiar. It is thus stated by Mac- "' naghten: "Where such property, being equivalent to the debt, may have been destroyed otherwise than by the act of the pawnee or mortgagee, the debt is extinguished; where it exceeds the debt, the pawnee or mortgagee is not responsible for the excess; but where it falls short of the debt, the deficiency must be made up by the pawnor or mortgagor : but if the property were wilfully des- troyed by the act of the pawnee or mortgagee, he will be responsible for any excess of its value beyond the amount of the debt." (Macnaghten's Mahomedan Law, page 82, para. 19.) There are one or two more points which deserve notice. T)ie pledgee was not permitted to enjoy the usufruct of the property pledged to him, but he was not chargeable with the expense of providing for the support of the pledge, although he was bound to provide for its custody. " It is to be observed," says the author of the Hedaya, " that the wants of a pledge are of two kinds: (1) such as are requisite towards the support of the pledge and the continuance of its existence; (2) such as may be necessary towards its preservation of safety, whether wholly or partly. Now, as the absolute property of the pledge appertains to the pawner, the expenses of the first class must, therefore, be defrayed by him ; and as he has, moreover, a property in the usufruct 56 PLEDGE FOR CONTINGENT DEBT. LECTUBE of the pledge, its support and the continuance of its '- existence for this reason also rest upon him, being an expense attendant upon his property, in the same manner as holds in the case of a trust. Of this class are the maintenance of a pledge in meat and drink, including wages to shepherds, and so forth; and the clothing of a slave, the wages of a nurse for the child of a pledge, the watering of a garden, the grafting of fig trees, the collecting of fruits, &c. The expenses of the second class, on the contrary, are incumbent on the pawnee ; because it is his part to detain the pledge ; and, as the preserv- ation of it therefore rests upon him, he is conse- quently to defray the expense of such preservation. Of the second class is the hire of the keeper of the pledge; and so likewise the rent of the house, wherein the pledge is deposited, whether the debt exceed or fall short of the value of the pledge." (Hedaya, Vol. IV.) A pledge cannot be given as a security against contingencies. Thus, a pledge deposited with a person as a security for anything which may be due in future, is invalid; "although," adds the Hedaya, " it is otherwise in the case of a promised debt, as where a person gives a pledge to another on the strength of his promising to lend him one thousand dirms, and the other takes the pledge and promises to lend the money, and the pledge perishes in his banda; fur in this case he is responsible in proportion SLOW DEVELOPMENT OF MAHOMED AN LAW. 57 to the sum promised, in the same manner as if it LECTURE had been actually paid, the promise of debt being - considered as an actual existence of it, for this reason that it was made at the earnest desire of the borrower." (Hedaya, Vol. IX, pages 208, 209.) In a case, in which a Mahoniedan vendor had deposited with the vendee the title-deeds of a certain estate as a security for his delivering up to the vendee the title- deeds of the property which had been sold to him, and which were not at the time in the possession of the vendor, Lord Kingsdown observed : " By the Mahoniedan law such a contract as the one under consideration for a security in respect of a contin- gent loss would be one not of pawn but of trust." ( Varden Seth Sam v, Luk putty Royjee Lalla, 9 Moore, p. 320.) We have seen that the pledgee had not, in the Mahoniedan law, an unqualified power of sale, and the reason why no improvement took place in this respect is not far to seek. The Mahouiedan law did not authorise the taking of interest, and this rule must have retarded the development of the law of pledge. We saw how common fairness suggested in Hindu law the rule by which the debtor was bound to redeem before the interest became equal to the principal. But no such liability was imposed upon the Mahoniedan debtor, because the pledge was thought to be a sufficient security so for as the creditor was concerned, and as the debt 58 ORIGIN OF BYE-BIL-WAFFAS. LECTURE could not receive any accession, the creditor did 1 not run much risk. The prohibition, however, relating to interest, led to the invention of the b/e-bil-waffa a kind of security analogous to the English mortgage, and possessing a very interest- ing history. The Mahomcdan creditor being prohibited by law from taking interest, hit upon the expedient of doing so under color of a sale with a clause for repurchase. Such a condition was perhaps strictly legal; but the Mahomedan lawyers ,were slow to recognise a transaction which had only the semblance of a sale, but which in reality was a loan repayable with interest. You will find the conflicting opinions of some of the most eminent Mahomedan lawyers on the point collected in Baillie's book on Sales. (SeeBaillie on the Maho- medan Law of Sale, pages 301 302.) The question seems to have been raised in a very c-arly case in the.Sudder Dewany Adawlut, when the Mahomedan Law Officers, who were consulted, gave the following opinion : " In the deed, there is first stipulated an absolute sale: afterwards, at the end of it, it is additionally stipulated, that, if the seller shall repay the purchase-money within a year, the .shall become void. The author of the Buhr-i- ravik says such a condition is illegal, except it be tor three days only, according to Huueefa and Aboo ] )U t according to Moohummud it is legal, CONDITIONAL SALES AND BYE-BIL-WAFFAS. 59 without restriction, as a sherti-khiar, or optional LECTURE condition." (Select Reports, Vol. I, page 76.) In a note to the case in which the above opinion was given, Mr. Macnaghten adds, " In the cause ' Busunt All against Ram Coomar] decided by the Sudder Dewany Adawlut, on the 4th of January 1799, there was a question put to the law officers respecting the legality of bye-bil-waffa sales, though the cause, as it happened, went off on a question as to the competency of the agent who made the bye-bil-waffa sale in that instance on the part of another. It was stated in the futwa then given, that a sale, with optional condition for three days, is good ; but for more than three days is not good, according to Himeefa and Yusof : but according to Moohunmiud, for four days, or even a longer period, is good: that the sort of sale being prevalent in the country, Moohummud's opinion should be followed. The intention of the parties, as collected from the tenor of the deed, shews whether the bye-bil- waffa be a sale with the reserve of an option of retractation within a limited time, or a mortsra^e ' O O for the security of money lent. A stipulation for a short period must be considered to mark that a sale was in the contemplation of the parties; a long term denotes a mortgage, or security for a loan : and such mortgages in the form of conditional sales are very common, and rightly held valid under the opinion here cited." (Select Reports, Vol. I, page 77.) 60 GRADUAL FUSION OF HINDU AND MAHOMEDAN LAW. The bve-bil-waffa is, however, regarded only in tlie lio-ht of a security, when any question arises as to its real character, and the debtor is regarded as the owner, notwithstanding the sale with a condition. Mr. Baillie refers to a case mentioned in the Eutwa of Abul Fuzzul, in which a person was allowed to assert a right of pre-emption, uotwithstading the ownership of the property, upon the foundation of which the right was claimed, had been transferred to another by a bye-bil-waffa. (Baillie's Malio- medan Law of Sale, p. 103.) This is no doubt a sensible view of the question, although it is ex- tremely open to doubt whether bye-bil-waffas would have obtained any recognition in the Mahomedan law, if the transaction had not originally masked itself as a sale with a clause of repurchase. I have brought down the history of bye-bil-waffas down to a comparatively recent period. As I have already said, the law relating to Ralm was also con- siderably modified in time, and hypothecation seems to have been common enough among the Maho- metans in this country when the earlier Regulations on mortgages were enacted. It would seem that by that time, the Hindu and Mahomedan law had born woldrd together, and the result was a mixed cm, which has since been brought to the shape in which we lind it by the infusion of some of the doctrines of the English Court of Chancery. In concluding this account of what I may call HYPOTHECATION. g I the early and mediaeval Hindu and Mahomedan LECTUEE law of pledge, I wish to call your attention to the fact, that neither of the two systems recognises any distinction between a pledge of rnoveables and a pledge of immoveables. A glance at some of the rules which we find will show that moveables alone were originally the subjects of pledge. Indeed, in the political and economic condition of ancient society, it could hardly have been otherwise. Land was of comparatively little value, while its alienation was guarded against with a jealousy common to all systems of archaic law. The necessity of trans- ferring the possession of the pledge to the creditor must also have proved a serious obstacle to land being given as a security. I speak with reserve, but the conjecture is plausible that as land gradu- ally increased in value, the rigor of the ancient rule was insensibly relaxed. The relaxation was probably at first confined only to immoveable pro- perty till in course of time it was extended to moveables. It is thus that in the Eastern, as well as in the Western world, the " substantial pledge " becomes ultimately "refined into the invisible rights of the hypotheca." LECTURE III. Conventional mortgages Different kinds of Simple mortgage Condi- tional sale Usufructuary Ottiof Madras Gahun I alien of Bombay Mortgage how created Writing not essential Effect of Registra- tion laws Parol defeasances inadmissible Mortgage by deposit of title-deeds Equitable mortgage in English law Memorandum True nature of Registration Proper subjects of mortgage General hypothecation invalid Capacity to mortgage Right of mortgagee to accessions Rights of mortgagor and mortgagee when pledge assumes a different form Byjnath Lall v. Ramdin Chow- dhry Power of sale in Mofussil mortgages Bhowani Churn Mitter's case. IN the present course of lectures I shall adhere to the classification of securities which we found in the Roman law. Following that classification, I propose in this lecture to make a few general observations upon the various kinds of conventional mortgages in use in India at the present day. From what I have already said, you must have ;i that a creditor possessing a security may have either a right to sell the property mortgaged to him, or lie may become the absolute owner of the property, on default of the mortgagor to repay the money lent to him. In the first case, the creditor is not entitled to anything in excess of the debt and costs. In the second case, the creditor becomes entitled to the property, whatever may be its value. CLASSIFICATION OF CONVENTIONAL MORTGAGES. 63 In either case, however, the creditor is wholly inde- LECTURE pendent of the debtor. There is, however, another way in which property may be given as a security, and that is by letting the creditor into possession, and permitting him to repay himself out of the rents and profits. Thus, we have three different kinds of securities all of which are to be found in India. The first is called a simple mortgage; the second, a conditional sale; and the third, a usu- fructuary mortgage. It is true they may be some- times found in combination, which gives rise to a greater variety; but the three I have mentioned are what I may call the primary divisions of Indian mortgages. There are in some parts of India par- ticular descriptions of mortgages peculiar to those provinces, as the Otti of Madras and the Gakun lahen of Bombay; but they do not possess much general interest, and one of them, the Gahun lahen, in its incidents, closely resembles the conditional sale of Bengal and the North-Western Provinces. I shall discuss the various rights and liabilities created by each of these kinds of mortgages in succeeding lectures. In the present lecture I I shall state the different ways in which conventional mortgages may be created, and the formalities which it is necessary to observe, ending with a few general observations on this class of securities. Neither the Hindu nor the Mahornedan law requires writing for the validity of any transaction, however solemn. (54 PAROL MORTGAGES. LECTUBE " Contracts of every description, involving both cor- - poral and spiritual consequences, may be made orally." (Per Holloway, J., 2 Mad., 37.) It is true that writing is often enjoined, particularly by Hindu lawyers, and preference, as we have seen, is sometimes given to a transaction evidenced by writing over a parol con- tract or transfer. But the fact remains that in no instance is writing absolutely necessary by law- Among Englishmen, however, who can only convey by deed, a parol mortgage is invalid at law. We shall, however, presently see that the strict rule of law has been broken in upon by the introduction of a class of securities, known as equitable mortgages, so called because they are only recognised by the Court of Chancery. Among Hindus and Maho- medans, however, a parol mortgage is as good as a morteasfe reduced to writing. This rule of CJ et \veen natives of this country, and if I use it, it is only out of deference to long continued USMLTO. The objection is not a mere verbal one. The case of LuchmiptUty and Seth Varden Sam shows the danger of extending technical English r\pivs>ions to transactions which have only a partial resemblance to the things denoted by such EQUITABLE DEFENCE. 77 expressions. In the Madras case, the defendants LECTURE insisted in their defence upon the doctrine of the English Court of Chancery, that they were protected from the claims of the plaintiff as purchasers for value without notice. Now if you examine the real nature of an equitable mortgage in the English law, and that of a mortgage by delivery of title-deeds in India, you will find a very remarkable distinction. In the English law, an equitable mortgage is only an agreement to mortgage owing to the incapacity of per- sons subject to the English law to convey otherwise than by deed. In this country, however, there being no such restriction, a delivery of title-deeds of itself operates as a conveyance. Now, as I have already explained to you, a contract does not create any real right, although English Courts of Equity, proceeding upon a very sensible ground, treat the contract as a conveyance as against purchasers with notice of the agreement. In an English Court of Equity, therefore, a purchase for value without notice would be a perfectly good defence to a suit by an equitable mortgagee, but in this country it would not furnish C* O ' "* any answer, for the so-called equitable mortgage not being in any sense a contract for a mortgage, the Indian equitable mortgagee has a right superior to that of any person claiming under a title sub- sequently derived from the mortgagor. It seems to me that the defence in the Madras case, to which I have referred, was suggested by the use of the 78 EQUITABLE MORTGAGE. LECTUBE unhappy expression " equitable mortgage " to denote 1 the nature of the right of the plaintiff in that case. I think I have said enough to put you on your guard against the misconceptions, which an inaccurate use of technical terms, borrowed from an extremely artificial foreign system, seldom fails to occasion. (See, however, Bunsheedhur v. Heera Lall, 1 All., 166.) I have already stated that the deposit of title- deeds is sometimes accompanied by a memorandum in writing, setting forth the nature of the transac- tion. Even in this case, however, the memoran- dum is not the contract between the parties; but the contract is implied by the Court from the deposit of the title-deeds and the advance of the money on such deposit. In the case of a mortgage in writing, if the instrument is unregistered, the mortgagee cannot, generally speaking, enforce his security against the land, because the contract is evidenced by the instrument itself, and that being inadmissible in evidence, no other evidence is allowed to be given. In the case, however, of a mortgage by deposit of title-deeds, although t lie re may be a memorandum, the memorandum is not looked upon as the instrument creating the niortmmc, but, as observed by the Court in Kedarnath Duff and another v. Sham Lall Kheifn/ (*> \V. K., p. 150) "the mortgage is created by the agreement which is evidenced by the EQUITABLE MORTGAGE. 79 loan and the deposit of the title-deeds. The LECTUBB mortgagee may, therefore, rely upon the parol agree- 1 ment, which is implied by the deposit of the title- deeds. It must, however, be remembered that the mortra2:e would not be a morto-a^e in writing, but t-7 O O O O' a parol mortgage, and therefore subject to all the incidents of a parol mortgage. The distinction is an important one, and requires to be illustrated by one or two recent cases in which the question has been raised. In the case of Kedernath Dutt and another v. Sham Lall Khettry, to which I have already alluded, the facts were shortly these. The plaintiff, who asked the Court to declare his rights as an equitable mortgagee on certain premises, had advanced to Woomachurn Banerjee a certain sum of money on the deposit of the title-deeds of certain property, belonging to the borrower. Woomachurn also executed a promissory note, whereby he pro- mised to pay to " Sham Lall Khettry or order the sum of Rs. 1,200, with interest at the rate of 24 per cent, per annum, for value received in cash." There was an endorsement on the promissory note in these words: "For the repayment of the loan of Rs. 1,200, and the interest due thereon of the within note-of-hand, I hereby deposit with Baboo Sham Lall Khettry, as a collateral security by way of equitable mortgage, title-deeds of my property situ- ate at No. 11 in Fuckeer Chand Hitter's Street at Mirzapore in Calcutta." " Woomachurn Banerjee." 80 EQUITABLE MORTGAGE. LECTURE There was some question as to whether the ! transaction was completed when the promis- sory note was given, but the Appeal Court thought that the question whether there was a com- plete equitable mortgage before the promissory note was given, or whether that was the completion of the transaction, was not material. It seems that after the deposit of the title-deeds the property was sold under an execution against Woornachurn and purchased by the defendants Kedernath Dutt and Madhub Chunder Bose. These defendants resisted the plaintiff's suit on the ground that the mortgage was created by an express agreement which was reduced to writing, and, as the endorsement was not registered, the plaintiff could not enforce any claim against the land which, as I have already said, had intermediately passed to them under an execution against Woomachurn Banerjee. The objection, however, was overruled. Sir Richard Couch in giving the judgment of the Court observed : " The rule with regard to writings is that oral proof cannot be substituted for the written evidence of any con- tract which the parties have put into writing. And the reason is that the writing is tacitly considered by the parties themselves as the only repository and the appropriate evidence of their agreement. If this memorandum was of such a nature that it could be treated as the contract for the mortgage, and what the parties considered to be the only PAROL EVIDENCE. gj repository and appropriate evidence of their agree- LKCTUBB ment, it would be the instrument by which the equitable mortgage was created and would come within section 17 of the Registration Act. But it was not a writing of that character. As I have said, the equitable mortgage was created by the agreement which was evidenced by the loan and the deposit of the title-deeds. The promissory note, whether given either at the same time or some hours afterwards in pursuance of the understanding between the parties, was evidence of the terms upon which the loan was made, viz.) that the interest should be at the rate of 24 per cent. " But as regards the contract between the parties, if tbere had been no memorandum at all on the promissory note, there would have been a complete equitable mortgage. When we consider what the memorandum is, we find it is not the contract for the mortgage, not the agreement to give a mortgage for the Us. 1,200, but nothing more than a state- ment by Woomachurn Banerjee of the fact from which the agreement is inferred. It is an admission by him that he had deposited the deeds upon the advance of the money for which the promissory note was given. It is not by the memorandum that the Court takes the agreement for the mortgage to be proved, but by the deposit of the deeds. This is no more than a piece of evidence showing the fact of the deposit which might be proved by any other 11 82 EQUITABLE MORTGAGE. LECTURE evidence. The memorandum need not have been in. , produced. " On the ground, therefore, that this was not a writing which the parties had made as the evidence of their contract, but only u writing which was evidence of the fact from which the contract was to be inferred, I think it does not come within the description of documents in the 17th section of the Registration Act." (20 W. R., 150.) There is another case to be found in the books (7 Bombay, 50) which is somewhat stronger. In that case the plaintiff had agreed to lend a certain sum of money to Devji Keshavji on a deposit of the title-deeds of certain property belonging to the debtor. The title-deeds having been deposited, the plaintiff continued to advance certain sums of money from time to time till the whole sum advan- ced amounted to that which the plaintiff hud origin- ally agreed to advance. On the 13th of June 1865, after the Registration Act of 1864 had come into force, and when the last advance was made, a Guz- rati document was executed by the debtor in which, after stating the amount which had been advanced from time to time by the plaintiff, the debtor proceeded to say, " According to these parti- culars I have received or borrowed from you at interest Rs. 25,000 in cash and currency notes. ( Mi account of the same (there are mortgaged) at your place my piece of land at Niiigani, namely, a PAROL EVIDENCE. go garden with a building (or) a bungalow, which LECTUBB (land) is registered under No. 36 in the Collector's books, and the building or dwelling-house built on the said piece of land that is registered under No. 9 in the books of the house-assessment Col- lector. All the deeds and other 'vouchers' relating to the said land having been left in mortgage at your place, Rs. 25,000, namely, twenty-five thou- sand, have been received (or borrowed) at interest thereon for an unlimited time." This document was not registered, and the ques- tion arose whether the writing being inadmissible in evidence, the plaintiff could enforce his rights as mortgagee. The question was answered in the affirmative, and Mr. Justice Bayley in givin- judgment is reported to have said : " I consider that the contract for a security on the land was created when the loan was applied for and agreed to, and the deeds were handed over to Karsandas; and that the receipt then and those subsequently given did not, nor did the Guzrati document of the 13th of June 1865, on which day Rs. 25, the last instalment of the Rs. 25,000, was advanced, create or declare any right or interest within the meaning of the Regis- tration Acts. The rights of the parties, be they legal or be they equitable, had already been created and perfected on the 31st of October 1864, and it required no memorandum or writing to render such rights valid, nor in fact was there evidence that any 84 PAROL EVIDENCE. LECTURE such document, or any deed or writing, was on the '- 31st of October 1864 contemplated by the parties. Suppose the receipts and the instrument of the 13th of June 1865 had never existed, the lien or charge on the property would still, in my opinion, have been perfect and valid. The fact of such informal native document being subsequently given and executed after the transaction had been completed, cannot, I think, in any way be held to affect the validity of that which Sir Lawrence Peel, in the Calcutta case, calls a perfected contfact of pledge, or, to borrow the words of Lord Kingsdown, was a ' contract which created between the parties a lien on the land' " In general, no doubt, where a contract has been reduced into writing by the parties, the writing is the best evidence of it, and must be produced. But it is not in every case necessary, where the matter to be proved has been committed to writing, that the writing should be produced. If, for instance, the narrative of an extrinsic fact has been committed to writing, it may yet be proved by parol evidence. I pon this principle a receipt for money given on unstamped paper will not exclude parol evidence of the payment, and the paper on which it is written may IK; produced not as evidence of itself, but as a material memorandum which a witness who saw it given may refer to, and give parol evidence of the fact of payment. (Rambert v. Cohen; FORMAL MORTGAGE. 85 1 Taylor on Evidence, p. 412, 5th ed.) So LECTUBB a verbal demand of goods is admissible in 1 trover, though a demand in writing was made at the same time : Smith v. Young. The fact, too, of birth, baptism, marriage, death, or burial may be proved by parol testimony, though a narra- tive or memorandum of these events may have been entered in registers which the law requires to be kept, for the existence or contents of these registers form no part of the fact to be proved, and the entry is no more than a collateral or subsequent memorial of that fact, which may furnish a satisfactory and convenient mode of proof, but cannot exclude other evidence, though its non-production may afford grounds for scrutinising such evidence with more than ordinary care." (7 Bombay, 62-63.) These cases, therefore, show that where the con- duct of the parties is such as to raise the inference of a mortgage, such conduct may be relied upon, although there may be a statement of fact in writing from which the same inference may be made. If, for instance, I borrow money on the deposit of title-deeds, I may state the fact of deposit in writing, but the writing is not the only evidence of such deposit, and it may be proved by other means. If, however, a formal document is executed, I apprehend such document must be taken to be the only evidence of the transaction, although there are certain expressions in the judgment of the 86 REGISTRATION. LECTURE Bombay Court which might perhaps lead to the - inference that even in such a case the parties might, so to speak, go behind the writing and rely upon the deposit coupled with the advance. If such was really the meaning of Mr. Justice Bayley, I venture to say, with great deference, that the dictum cannot be supported to that extent. The distinction is clear between a writing containing a statement of fact from which the Court may infer a contract, and a document in which the contract itself is reduced to writing. From what I have already said it is clear that a memorandum of the description mentioned above is not a document the registration of which is com- pulsory. This was substantially decided in both the cases I have mentioned. I have gone at some length into the subject because I think the nature of what is called an equitable mortgage cannot be properly understood without a careful study of the distinction between mortgages of this class, and what I have called express conventional mortgages; and this dis- tinction is very clearly brought out in the cases in which questions of the admissibility of the memo- randum, which sometimes Accompanies the deposit, have been raised. I Lave already said that an equitable mortgage, although it may be accompanied by writing, is still only a parol mortgage. It is, therefore, liable to all the disadvantages imposed by the Registration Acton PROPER SUBJECTS OF MORTGAGE. parol transactions. If the mortgage is not followed or accompanied by possession, and equitable mort- gages are very seldom followed by delivery of pos- session, it is liable to be postponed to subsequent incumbrances wbich may be registered. A some- what difficult question may perhaps arise if the memorandum is registered, but that is not generally practicable owing to the provisions of the Registra- tion Act; Section 21 of which says, " No document, not testamentary, relating to immoveable property, shall be accepted for registration unless it contains a description of such property sufficient to identify the same." Even if the memorandum accompany- ing an equitable mortgage be registered, I should venture to think that the mortgagee would not be in the same position as one who holds a regis- tered express conventional mortgage. To go back. Every species of property, whether moveable or immoveable, which can be alienated, may be also the subject of mortgage, but it seems that a general hypothecation will not be recognised as valid by our Courts. (N. W. P., Vol. VII, p. 265; S. D. A., 1855, p. 353; compare 2 All., 263). The question, however, is not now of much practical importance, as no document which does not suffi- ciently specify the property comprised in it, can be registered, and a general hypothecation, therefore, cannot be created by registered instrument. As regards the power to mortgage, it may be said JII. 88 CAPACITY TO MORTGAGE. LECTURE that, generally speaking, a mortgage being a quali- - fied alienation, the same rules which regulate the power to sell also regulate the capacity to mort- gage. A detailed examination of these rules, which you will find in Mr. Justice Macpherson's treatise on Mortgages, would carry me much beyond the range of the present lectures. A doubt may, however, some- times arise when trustees are empowered to sell, and no express power to mortgage is given. The law on the subject in England is that a trustee empowered to sell has presumably the right to mortgage, except when there is clear indication in the language of the intrument that no such authority was intended to be given. The question does not seem to have been ever distinctly raised in this country ; but there can be no doubt that if it should arise the point will be decided in the same way. I shall now proceed to discuss the rights of the mortgagee, when the property pledged to him has received any accession, or undergone any alteration. The general law on the subject is that the creditor has not only a right against the property mortgaged to him, but also to any aug- mentation or increase. Thus, if a flock of sheep be mortgaged, the creditor acquires the same rights to any natural increase, as he has against the animals which composed the flock at the time of the mortgage. On the same principle, accessions to the mortgaged property by alluvion become RIGHTS OF PLEDGEE. ft() subject to the mortgage. In some systems of law, LECTUBB the right of the mortgagee to whom land has been '- pledged extends to any buildings which may be subsequently erected by the debtor on the land. The right has not, however, so far as I am aware, been carried to a similar extent in India. The right of the mortgagee will, however, not extend to anything which was never pledged to him, although it may be substituted in the place of the property originally pledged. Thus, to take a familiar instance from the Roman law, if a farm together with the slaves upon it be pledged, and the slaves die and are replaced by others, the right of the creditor shall not extend to the latter, except, as I have already said, where they are the issues of the deceased slaves. This limitation of the right of the creditor how- ever must not be confounded with cases in which the pledge is not actually destroyed, but to use the language of Sir James Col vile, only " assumes a new form." A question of considerable nicety on this point arose in the case of Byjnath Lall v. Ramdin C/iowdhry, which was heard in the last resort by the Lords of the Judicial Committee of the Privy Council. In the case before the Privy Council, which was heard on an appeal from a decree of the Calcutta High Court, the facts were somewhat peculiar. It seems that the mortgagor Gopalnaraiu Dass 1-2 90 EIGHTS OF PLEDGEE. LECTURE was, when lie executed the deed of conditional sale, '. which was the foundation of the plaintiffs title, the undisputed owner of an eight-anna undivided share in an estate consisting of three Asli mouzas called Gunniporebija, Peniburiuda and Tajpore Ruttom- pore, to each of which certain Dakhila villages were appurtenant. There was no partition or division among the shareholders, and the interest of the mortoa^or therefore in the whole estate was an o o undivided moiety. In this state of things Gopal- narain executed the mortgage, out of which the suit arose, of the whole and entire eight-anna of the whole 16 annas of Mouzas Guuniporebija and Pemburinda, expressly excepting from the deed the eight annas of Tajpore Ruttompore. It should seem that before the execution of the mortgage, application had been made by some of the co- shurers of the mortgagor for a partition of the estate under Regulation XIX of 1814. A partition was made by the Collector, and the result was that, instead of an undivided moiety of the whole estate, the whole of Mouza Pemburinda, the whole of Tajpore Ruttompore, and whole of another mouzu, a dependency of the third Mouza, Gunniporebija, were allotted to Gopalnarain, to be held by him in eeveralty. Shortly after the partition, Gopalnarain's rights and interests in the mouzas, which fell to his share, were sold at execution sales, and purchased by certain persons, who were the substantial defend- RIGHTS OF PLEDCKK. 91 ants, and who resisted the right of the plaintiff, the 1 1 1 mortgagee, to take anything under his mortgage deed in excess of the eight-anna share of thr; mouzas which had been mortgaged to him, the mortgagee insisting upon his right to the whole sixteen annas of the mouzas which fiad fallen to the share of the mortgagor in lieu of the undivided moiety whicli was held by the mortgagor at the time of the execution of the mortgage. The Court of first instance gave judgment in favor of the plaintiff, proceeding upon the principle that the mortgagee was entitled to whatever was allotted to the mortgagor on the partition in lieu of his undivided eight-anna share in the Mouzas Gunni- porebija and Pemburinda, which was the subject of the mortgage. On appeal, however, to the High Court, the right of the mortgagee was limited to the o o o share which was expressly named in and covered by the mortgage deed, i.e., only to an eight-anna of Mouza Pemburinda and an eight-anna share of Mouza Gunniporebija. The case then went on appeal to the Privy Council, and the Judicial Com- mittee affirmed the decree of the first Court, and declared that the principle laid down by the first Court was correct. In giving the judgment of the Privy Council, Sir James Colvile is reported to have observed : " Let it be assumed that such a partition has been fairly and conclusively made with the assent of the mortgagee. In that case, can it be 92 POWER OF SALE. LECTURE doubted that the mortgagee of the undivided share of one co-sharer (and for the sake of argument, the mortgage may be assumed to cover the whole of such undivided share), who has no privity of contract with the other co-sharers, would have no recourse against the lands allotted to such co- sharers ; but must pursue his remedy against the lauds allotted to his mortgagor, and, as against him, would have a charge on the whole of such lands. He would take the subject of the pledge in the new form which it had assumed. In the present case there is not a suggestion of fraud, nor is there any ground to suppose that the partition was other than fair and equal. The mortgagee is content to accept what has been allotted in substitution of the undivided interest as the fair equivalent of it. Their Lordships are of opinion, not only that he lias a right to do so, but that this, in the circum- stances of the case, was his sole right, and that he could not successfully have sought to charge any other parcel of the estate in the hands of any of the former co-sharers. There is, therefore, no question here of election, or of the time when the election was made." (21 W. R., p. 237; com- pare N. W. P., Vol. VIII, p. 669; S. D. A., 1857, p. 359.) I shall now proceed to consider the validity of a power of sale contained in a mofussil mortgage. The question appears to have been for the first POWER OF SALE. 93 time raised in the case of Bhowani Churn Miller v. L Ef : Joykishen Mitter, heard before the late Sudder Dewany Adawlut of Calcutta in the year 1842, when the Judges were unanimously of opinion that a sale by the mortgagee under the power did not pass a valid title to the purchaser. The decision has been criticised by Mr. Justice Macpherson in his work on Mortgages (pp. 45 47), and there is no doubt that some of the reasons given by the learned Judges will not bear examination. But the judgment of the Court substantially rests upon the broad ground that it would be inexpedient to allow the mortgagee in this country to exercise the power. It is true that such a power has been found beneficial in England, but English mort- gagors as a class are perfectly competent to take care of their own interests. In India, however, we have to deal with a very different order of men. The mass of mortgages in this country consist of mortgages of ancestral fields by ignorant ryots to a class of people not remarkable for their scrupulousness, and any one having experience of Indian litigation, must admit the danger of arming our money-lenders with the right to sell the properties pledged to them without the interven- tion of a Court of Justice. As observed by the Court in Bhowani Churn Mitter v. Joykissen Mitter . " This Court has only to declare such a condition Wai, and in the course of a short time O ' 94 POWER OF SALE. LKCTURE not a mort^n^e bond would be without it. Tlie 1 1 1 '- mortgagee would then sell his debtor's property to suit his own time, aud in such manner and with such publicity and formalities as he thought proper. Fraud, it is to be feared, would frequently accompany the transfers, and the property fall into the hands of the mortgagee, or some of his con- nexions (even as in this case it is alleged the pur- chaser is the son-in-law of the mortgagee) at an inadequate price, leaving the lender at liberty still to pursue the borrower for the balance that may remain after the sale." (7 Select Reports, p. 429.) With reference to the argument that the exercise of the power of sale was not unfair to the debtor, the learned Judges observe: "It is urged for the plaintiff that the public sale of the mortgagor's property cannot be a disadvantageous mode of proceeding towards the latter, that his property is .sold to the highest bidder, and that if a surplus remains it belongs to himself. We have not to deal with abstract theories or bare possibilities, but with what experience and the principles of the Regulations furnish us, as our guides in the deter- mination of a novel and unprecedented case. In a case of execution of a decree of Court, the proclamation of sale is an invitation to others interested to come and state their claims. If no claim is preferred, the title of the purchaser may .rally be considered a pretty fair one. It' claims POWER OF SALE. 95 are preferred, they are summarily investigated, and, LECTUBB should they appear fraudulent, are rejected; and io this case, too, the purchaser may generally be considered in a good position, as few are willing to incur the expense of a regular action on grounds already declared by a Court of Justice to be primd facie fraudulent. And yet, with all the formalities and securities of a transfer of real property by sale made by a Court of Justice, how frequent are the complaints that the property has been sold at an inadequate price, how much more frequent would they be, had not this Court held that inade- quacy of price, at a regularly conducted sale, forms no ground for its reversal ! If such be the case in such sales, the evils to be apprehended from permitting private individuals to sell their debtor's property, in satisfaction of their claims, must be ten-fold. But few purchasers at a fair price will be found, when, in all probability, a law- suit (as the order granting the review expresses it) will be tacked to the purchase. The object of the Regulation is to prevent improvident and injurious transfers of landed property at an inade- quate price; the result of such a practice as that which the contract before us involves would be to render them universal." (7 Select Report, pages 440-41.) It is true that the utmost latitude ought to be given to the parties to contract in any manner they 96 FRENCH CODE NAPOLEON. LECTURE please, but freedom of contract wears a very different in. aspect according as it is allowed to the English landowner or the Hindu ryot, and I am fortified in my view by the recommendation of the Indian Law Commissioners, who propose in their Sixth Report that a sale under a mortgage should in every case be conducted by the Court. (See also the observations of Melvill, J., in Kesub Rao v. Bhowaneejee, 8 Bom., p. 142.) We have already seen that in most continental systems a sale without judicial process is absolutely void. Article 2078 of the French Code says," The creditor cannot in default of payment dispose of the pledge, saving to him the power of procuring an order of the Court that such pledge shall con- tinue with him in payment, and up to its due amount according to an estimate made by com- petent persons, or that it shall be sold by auction." " Every clause which shall authorise the creditor to appropriate the pledge to himself, or to dispose thereof without the abovementioned formalities, is void." You will remember that the French Code, equally with the other systems of law on the Continent, is largely shaped by the Roman law, and if the power which the Roman pledgee possessed has not been retained in those systems, it may fairly be presumed that the exercise of the power is not suited to every condition of society. But for the peculiar economic POWER OF SALE IN ENGLAND. 97 conditions under which land is owned in Eniiland, LECTUBE in. it may indeed fairly be doubted whether the system would have worked well even in that country. Be that, however, as it may, there can be no doubt that it would be dangerous to trust the Indian money-lender with a power which is so much liable to abuse. (See Appendix I.) 1., LECTURE IV. SIMPLE MORTGAGES. What constitutes simple mortgage Conflicting dicta Nature of security possessed by simple mortgagee How made available Decree for sale What passes under such decree Rights of puisne encumbrancers Haran Chunder Ghose against Dinobundhu Bose Law of execution Practice of Continental Courts Effect of clause against alienation in mortgage deed Lis pendens Mortgagee not bound to proceed against pledge May waive his rights as mortgagee Sale of property " subject to mortgage "Sec. 271 of Act VIII of 1859 Sec. 270 how construed Right of simple mortgagee, a real right Defence of pur- chase for value not available Period within which security must be enforced Court in which mortgagee must sue Conflicting deci- sions on the point. A SIMPLE mortgage is a mortgage in which the Cj O O O land is pledged as a collateral security, the right of the creditor in default of payment being limited to a sale by judicial process of the land hypothe- cated to him. In this kind of mortgage the per- sonal liability of the mortgagor is not excluded. It corresponds to the hypothecation of the Civil law and the systems of law which are founded upon it. In a pure simple mortgage the mortgagor is not put into possession of the property pledged to him. lie has not, therefore, the right to satisfy the debt out of the rents and profits, nor can he acquire the absolute ownership of the estate by foreclosure. WHAT CONSTITUTES A MOBTGAGE. 99 No particular form of words is necessary to con- LECTUBH stitute a simple mortgage. Difficulties, however, IV " not unfrequently arise owing to the extremely inartificial language of Indian instruments. In tiie case of Gunga Persaud Sing v. Lalla Behary Lall, in which the question arose whether a bare cove- nant by the debtor not to alienate his property till the debt should be repaid, constituted a simple morts;a2;e so as to confer a real rio-htonthe creditor, O O O the Court observed : " As a general rule we adhere to the principle laid down in the case of Chunder Kishore Surma (9th July 1855), that the title of a person who purchases in good faith is not vitiated by any contract into which the vendor may have previously entered with a stranger binding himself not to alienate his property. If a party is desirous of obtaining a valid lien on any particular property, he should adopt the simple means which the various kinds of mortgage in use in this country afford. If he does not choose to do so, the fault is his own, and the innocent purchaser should not be made to pay the penalty of his negligence." ( S. D. A., 1857, p. 825.) It may, no doubt, be said that such a doctrine would very frequently defeat the intentions of the parties ; but the rule of construction founded on the presumed intention of the parties, unless care- fully fenced in, is calculated to introduce the very greatest confusion. It would carry me much ] 00 RULE OF CONSTRUCTION. LKCTI-RE bevoiul the limits of the present lecture to examine the various aspects of this doctrine, and there are probably many among you who are familiar with the controversies on the point in some famous writings, both ethical and juridical. There is, how- ever, a speciousness about the rule which is betrayed only on a close examination. It is true that if the intention can be collected from the instrument, the form of expression is not material. But the real difficulty lies in collecting the inten- tion when it is not formulated in apt words. In the Reports of the Agra High Court you will find two cases, in one of which the Court thought that the debtor intended to create a mortgage, while in the other it was held that there was nothing to show an intention to create a charge on any pro- perty. The language of the two instruments, so far as can be gathered from the report, was almost precisely the same, the debtors covenanting with their creditors in both the cases not to alienate their properties till the debts were repaid. ( Chwit'jj Lall v. Pallowun Sing, 4 Agra H. C., 217 ; Martin \. Purrissrum, 2 Agra H. C., 124. See also 7 W. R., 309; 13 W. R.,F. B., 82 ; compare N.W. P., vol. VH, ]>. 124 ; vol. VIII, p. 669.) The caustic observations of Mr. Fearne on Perrin v. Blake will suggest themselves to every one familiar with the writings of that accomplished lawyer. 1 will now proceed to discuss the rights of the DECREE FOR SALE. ] ( ) [ mortgagee under a simple mortgage. We have LF, seen that he has no right to enter upon possession - of the property mortgaged to him, or to foreclose the mortgagor's equity of redemption. The only mode in which he can avail himself of his security is by a sale through judicial process of the pro- perty pledged to him under a decree of the Court, the mortgagee having a right to be paid out of the purchase money. According to the usual practice of the moftissil Courts the mortgagee asks by his plaint for the sale of the mortgaged property, and if he succeeds lie obtains a decree for the money due to him with a declaration that the mortgaged property should be sold for the realization of the money. I may men- tion that in the Madras Courts a period of six months is usually allowed to the mortgagor to pay the money found due to the mortgagee on his security. This indulgence, however, which seems to be bor- rowed from the practice of the English Court of Chancery, is not allowed to the mortgagor elsewhere, and the propriety of extending it to a decree for sale is perhaps open to question; such a decree standing upon very different ground from a decree for foreclosure. Even in England an immediate decree for sale is not unfrequently made by the question, however, is not of much practical ;ance, and I have referred to it only to show 102 DECREE FOR SALE AND MONEY DECREE. LECTURE how largely even in details our law of mortgage is - shaped by the practice of the English Courts of Equity. It used to be thought at one time that a pur- chaser under a decree which did not direct a sale? acquired no higher rights than one under an ordinary execution. Those cases, however, are no longer law, and it is now settled that the mortgagee o ' o o conveys to the purchaser the benefit of his own lien and the equity of redemption of the debtor, as well when the sale is under a decree for sale as when it is under a " money decree." (Haran Chunder Ghose y. Dinobundhoo Bose, 23 W. ., 186.) The doctrine that a sale under a money decree passed to the purchaser only the rights and inter- ests of the debtor, was apparently founded on the notion that the mortgagee by accepting a money decree waived the benefit of his lien, for it could not be contended with any show of reason that the mortgagee, notwithstanding the sale, would retain the benefit of his security. But if the doctrine rested on any such notion, it was not reconcileable with the principle recognised in a large number of cases that if the mortgagee was unable to take the land mortgaged to him in execution of a money decree, he might bring a fresh suit for the purpose of making his security available on the land. It is, however, unnecessary to pursue the discussion further, as the cases in which the right of the purchaser was limited to WHAT PASSES UNDER SALE. 103 the bare equity of redemption possessed by the LECTUBE mortgagor, if the decree was only for money, are no longer law. The Full Bench ruling, however, made another im- portant alteration in the law as it was previously understood. It used to be thought that a sale under a mortgage passed the property to the purchaser as it stood at the date of the mortgage, and that a decree for sale made in the presence of the mort- gagor, but in the absence of the puisne encum- brancers or other persons possessing only a quali- fied interest in the equity of redemption, was a good decree and passed a complete title to the purchaser. As the law, however, now stands, it would not be safe for the mortgagee to sell the property pledged to him under a decree not made in the presence of the subsequent encumbrancers, who cannot be concluded by an order for sale made in their absence. "If there be persons not parties to the suit claim- ing an interest in the property, no form of dealing with the property in their absence can prejudice their rights." (Per Couch, C.J., in Haran Chunder Ghose v. Dinobundhoo Bose, 23 W. R., 190.) The rights, however, of the subsequent encum- brancers are nowhere defined in the judgment. It is only said that the purchaser under a decree made in their absence purchases the property sub- 104 PUISNE ENCUMBRANCERS. LECTURE j c ct to their rights. He buvs the lien of tlie cre- iv. J ditor and the equity of redemption of the debtor, the entire interest which they could jointly sell, and if there are no third persons interested in the property, it becomes absolutely vested in the pur- chaser. The doctrine, therefore, which is to be found in some of the cases in the books that a sale by a mortgagee conveys the property to the purchaser free of all subsequent encumbrances must now be received with some qualification. A mortgagee is no doubt competent to transfer the property to the purchaser in the state in which it was pledged to him, but this can only be effected by a sale under a decree in which the subsequent encumbrancers are represented. If the sale take place under a decree against the mortgagor alone, no complete title passes to the purchaser. I have already said that the Court did not, in the case of Haran Chunder Ghose, define the rights of the subsequent encumbrancers as against the purchaser under a decree made in their ab- sence. The question, however, arose in the subse- quent case of Nobocoomar Ghose against SMkdctT) in which the debtor having mortgaged his property to two persons in succession, the lirst mortgagee brought a suit and obtained a decree, but only agaiiiot the debtor. The property PUISNE ENCUMBRANCERS. 105 was sold under the decree and purchased by the LECTURE mortgagee himself. The second mortgagee also sued the debtor, and the property was again sold under the decree and purchased by the creditor. The Court held that the purchaser under the first decree was entitled to possession, but that, as the puisne mortgagee was not a party to the decree under which the purchaser acquired his title, the purchaser under the second decree had a right to pay off the amount due under the first mort RIGHT OF REDEMPTION. decree against the debtor and in the absence of B. j \ The purchaser purchases only the lien of the creditor and the right of redemption subsisting in the debtor, which together is by the hypothesis worth Rs. 15,000 plus 2,000 == Rs. 17,000. Now B would have a right to pay off the debt due under the first mortgage, and to treat such payment, together with the amount due to him, as a charge on the property, i.e., by paying off to the purchaser the fifteen thousand due under the first mortgage, he would acquire a charge on the property for Rs. 15,000 plus 3,000 =="Rs. 18,000. Now, in order to enforce that charge he would have to bring a suit against the purchaser who, as we have seen, has acquired the right of redemption of the debtor. Now if the purchaser pays him off, he acquires an absolute title to the property. But in that case he would have to pay altogether Rs. 17,000 minus 15,000, i.e., Rs. 2,000 plus 18,000 == 20,000, which we have assumed to be the value of the property. Jjiit suppose the purchaser does not choose to pav off the consolidated charge on the property, the property must be sold, and assuming that it fetches its proper price, the mortgagee gets Rs. 18,000, and tho purchaser gets back the two thousand rupees which he had laid out. If the property is so heavily burdened that the right of redemption is worth nothing, the purchaser would not be safe in paying anything in excess of the debt due under the first mortgage. To that extent lie would be secure EIGHTS OF LESSEES. against the claims of subsequent encumbrancers. LECTUBB If the purchaser pays less than the amount of the debt secured by the first mortgage, he cannot insist upon the second mortgagee paying to him anything in excess of the purchase money, although I am not to be understood as saying that the case might not be different if the creditor himself became the purchaser. The principle applicable to subsequent mort- gagees has been extended on the authority of Haran Ckunder G/tose v. Denolundhoo Bose to other persons possessing a qualified interest in the equity of redemption lessees, for instance, holding under beneficial leases created subsequently to the mort- gage. In the case of Byjnatli Singh v. Goburdhun Lall (24 W. R., 210) the purchaser under a sale by the morto-arree sous-lit to set aside a lease created by O i_j O J the debtor subsequently to the mortgage. The lessee was not a party to the suit by the mortgage creditor, and the order directing the sale was made in his absence. It was contended on behalf of the pur- chaser under the execution that the lessee was not a necessary party to the suit, and that as the lease had been executed subsequently to the mortgage, it was not binding upon the purchaser. The Court, however, held otherwise, being of opinion that the sale did not pass the property absolutely to the purchaser, and that the rights of the lessee who 108 NATURE OF SIMPLE MORTGAGE. LECTURE claimed an interest in tbe property could not be prejudiced by a sale under a decree made in his absence. It would, bowever, seem, altbougb tbe point was not before tbe Court, tbat tbe purchaser, as assignee of tbe lien of tbe creditor, would have a right to insist upon tbe lessee's redeeming him, and on bis failure to do so, to sell tbe property, tbe purchaser being entitled to a charge on tbe purchase money to the extent of tbe lien of the creditor who first put up the property to sale ; and this would seem to be the only course open to him if the mortgage security was impaired by tbe creation of tbe term by tbe debtor. Under the law as it stood before the Full Bench ruling in Haran Chunder Ghose's case (23 W. R., 187), the sale by the mortgagee would have avoided tbe lease, and the right of the tenant would have been confined to tbe surplus proceeds of tbe sale. (Brcjo Kishoree Dassee v. Mahomed Solim, 10 W. R., 151. See also 7 W. R., 67 ; 10 W. R., 291.) The security which is possessed by a mortgagee under a simple mortgage is, as I have endeavoured to explain, tbe right to sell the entire estate of the mortgagor as it existed at the date of the mortgage free of any charges on tbe property subsequently created by tbe debtor. Tbe Calcutta High Court bus not made any alteration in respect to the nature of tbe security to which the mortgagee becomes entitled under this form of mortgage, tbe rule laid down by PUtSNE ENCUMBRANCERS. JQQ the Court being a mere rule of procedure. The LKCTTURK mortgagee has still the right to sell the entire estate of the mortgagor as it existed at the date of the mortgage, but he must take care to bring the puisne encumbrancers before the Court. Under a decree for sale obtained in their absence, the mortgagee can only transfer to the purchaser the benefit of his own lien and such interest, if any, as may be possessed by the debtor at the time of the institution of the suit. As far as I have been able to discover, the rulin- ' O of the Calcutta High Court has not been followed in the other provinces, and a purchaser under a decree for sale obtains a complete title to the pro- perty although such decree may have been made in the absence of the puisne encumbrancers. It is perhaps idle to expect that the case of Haran Chunder Ghose v. Denobund/ioo Bose will be reconsi- dered. It is, however, doubtful if the Court did not in that case go too far in their anxiety to protect the interests of posterior encumbrancers. It is true that no person ought to be affected by an order made in his absence. But how is the puisne encumbrancer affected by the conversion of the estate into money ? He may have a right to the surplus proceeds, and if that is secured to him, it is difficult to discover how he can be possibly prejudiced by a decree for sale. In every system of law in which the pledgee possesses the right of sale, what he sells is HO SALE BY MORTGAGE. LECTURE the property pledged to him, and not merely an - undefined interest in the pledge, and no claimants upon the property posterior to the first pledgee can interfere with this right. (See the observations of Markby, J., in Haran Chunder Ghose v. Denobun- dhoo Bose.} I do not deny that very different con- siderations would arise if the mortgagee asked not for a decree for sale, but one for foreclosure. A decree for foreclosure stands upon a very different footing from a decree for sale, and any argument founded upon analogy would be sure to mislead. There is besides another aspect of the question which I have not yet considered. It is very seldom, indeed, that an estate sold under an execution realizes an adequate price, and the encouragement offered to speculative purchasers is one of the prin- cipal sources of a good deal of litigation never very healthy, and frequently dishonest. It is not difficult to foresee that the result of the Full Bench rulhm; ^ will be to aggravate the evil, and that both mort- gagee and mortgagor will suffer by the sale of rights which must be to a great extent uncertain. The mischief is carefully guarded against in other systems of law by provisions which, while they secure to the creditor his just rights, prevent a need- less sacrifice of the property of the debtor. Indeed, in this respect the interest of the debtor is identical with that of his creditor, as the object of both must be to secure the best possible price for the property. CONTINENTAL LAW. Under the law as it was understood before the LECTUBB Full Bench ruling to which I have had occasion to refer so frequently, this might be always accom- plished by a sale by the first pledgee, who it was thought could pass the property free of all subse- quent encumbrances. In the case of a puisne encumbrancer the result was, no doubt, different, as the sale by him was, as it still is, subject to all prior mortgages. It may, however, be suggested that even in this case it might perhaps be more convenient to allow the creditor to sell the estate, the preferential right of the prior mortgagee to the purchase money being secured to him. I am afraid that the sugges- tion may be regarded as somewhat wild, and I am free to confess that it is one which I should not have ventured to make if I had not found similar provi- sions in the law of France and other countries, whose jurisprudence is moulded on the Roman law. Broadly speaking (for I do uot pretend to give a detailed account) a sale under an execution extin- guishes all hypothecary rights or debts affecting the property, the right of the creditor being trans- ferred to the purchase money. For this purpose the proceeds of the sale are deposited in the Court, and the creditors of the mortgagor are cited to appear and assert their claims. A proceeding i.s then adopted by which the respective priorities of the creditor are ascertained, and the proceeds divided according to the result of the investigation. 112 CONTINENTAL LAW. LECTURE This proceeding is called the prceferentia and con- currence of creditors. Its object is to comprise the adjudication and assertion of those claims which are prior or preferred, as well as those which are con- current. Each claim to be preferred or ranked concurrently is regularly brought to issue and debated, and the Court, by its sentence, declares the order in which the parties are to rank on the pro- ceeds. (Code de Proced. Civile, tit. 14; see also Burge's Foreign and Colonial Law, Vol. II., pp. 592-3; Vol. Ill, pp. 229-30.) This is a very simple and intelligent rule. It secures to the debtor a fair price for his property, and thus, as I have already explained, effectually protects the interests of the creditor. Trafficking in doubt- ful claims, one of the least interesting phases of litigation, finds no encouragement in such a system, while the rights of the creditors are guarded with a jealousy not less scrupulous than that which we find in systems with which we are more familiar. I have ventured to detain you with this slight sketch of the continental system of execution, not because I think there is much likelihood of the introduction of the principle into our own law, but because I think the student ought to have some acquaintance with the leading features of a system of jurisprudence which obtains in :i large part of the civilized world. A too exclusive attention to any one system is likely to induce a SALE BY MORTGAGEE. U3 habit of mind, which I am afraid is to he found in LECTURE other persons besides the worthy English convey- ancer, who thought that an attempt by the legislature to preserve contingent remainders without the inter- vention of trustees was about as absurd as an attempt to alter the laws of nature. Certain doctrines, true only in a limited sense, come to be regarded as fundamental principles of jurispru- dence, and acquire such a firm hold that even the most gifted minds become intolerant of criticism. We have not to go far to seek for illustrations. To return : As the law at present stands, the right which passes under a sale by a mortgagee is the entire interest which the mortgagor and mortgagee O o o O could jointly sell. Where the subsequent encum- brancers are parties, and the order for sale is made in their presence, the purchaser acquires a higher right which may be described as the entire interest which the mortgagee together with the puisne encumbrancers and the mortgagor could jointly convey. This is not distinctly stated in the judg- ment of the Court in flaran Chunder Ghose v. Dennbundhoo Bose (23 W. R., 186), but there can be very little doubt that this would be so. In the case, however, of the second mortgagee, the interest which the purchaser acquires must be necessarily subject to the prior charge, and the presence of the first mortgagee as a party would not, I apprehend, make anv difference. In this respect, as I have 15 1 ] j SALE BY PUISNE MORTGAGEE. Lwrrna already said, the Full Bench has made no change in the law as it was previously understood. It is only in the case of a sale by the first mortgagee that the rule laid down in the earlier cases has been qualified bv making the presence of the puisne encumbrancers essential to the passing of the estate absolutely to the purchaser. I have already explained that the doctrine has been extended to the case of a lessee, and there can be no doubt that it will be applied for the protection of all persons having an interest in the property, and not parties to the decree under which the property is sold. I have said that the Full Bench ruling in Haran Ch under Ghose v. Denobunhoo Bose has made no change as regards second mortgagees. The propo- sition, however, must be understood with the neces- sary qualification that the second mortgagee stands in the same relation to posterior mortgagees that the first iiif: does to him, and that he is, there- fore, under the same obligation towards them as the O first niortua-; i is towards him. Thus a purchaser under a sale by the second mortgagee, although he inuM. in any event purchase subject to the rights of the first mortgagee, acquires a very different ite accordingly as the posterior mortgagees are parties t<> the decree or not. If the order for sale is made in their presence, the purchaser acquires the Intel v as. against them, but if it be otlier- \ the unrcha>e is made subject to their right to DOCTRINE OF LIS PENDENS. 115 redeem. I may also point out that although it 1ms . LECTURE been always held that a purchaser of the mort- - gagor's interest is a necessary party to a suit by the mortsras-ee to enforce his charge, tlie rule was ~ O O ' never extended to persons possessing a more qualified interest in the estate. The rights of these persons were recognized, so far as I am aware, for the first time, in Haran Chunder Ghose v. Denobun- dhoo Bose (23 W. R., 186). I have said that a sale by the mortgagee conveys to the purchaser the entire interest which he and the mortgagor could jointly sell. I may, however, point out that this refers to the interest which they could jointly pass, not at the time when the property is sold, but at the time of the institution of the suit in which the decree under which the property is sold, is made. This is a necessary consequence of the doctrine Us pendens, which I shall have occasion to discuss in a subsequent lecture. I may also point out that the language of section 259 of the Civil Procedure Code is perhaps, in strictness, inap- plicable to a sale by a mortgagee which takes place under a decree for sale, and not as in an ordinary execution. The right, title, and interest of the judgment- debtor, of which the section speaks, must be understood in a somewhat wider sense than the right possessed by the debtor at the time of the sale. As I shall have occasion to explain presently, the provisions of the Procedure Code with respect to CLAUSE AGAINST ALIENATION. LBCTURK executions are far from being clear on the rights IV. of the mortgagee. In connection with this subject I may mention that a question may arise, hut which, so far as I am aware, has not been decided, as to the effect of a clause against alienation contained in a deed of mortgage. Such clauses are frequently found in Indian mortgages. I have already explained that ordinarily a clause against alienation does not prevent the alienee from acquiring a title to the property. The covenant does not affect the thing itself, although in some cases the covenantor may render himself liable to an action for a breach of his contract. It would, however, seem that in the Civil law a clause against alienation by the mort- gagor is allowed to bind the property itself, and a subsequent alienation is therefore void. In conse- quence of this doctrine the mortgagee is not bound to recognise any alienee of the property mortgaged to him, it there be a clause against alienation in the mortgage. It seems that in some of the earlier 'S to be found in the books, the doctrine was carried by the Indian Courts further than equity or good conscience would seem to justify; but it may ion whether, in the presence of such a .stipulation, a decree obtained by the mortgagee, and a sale thereunder, although made in the absence of who acquired an interest in the property M -i| neatly to the mortgage, would not pass an SIMPLE MORTGAGE. 117 absolute title to the purchaser. In the absence of LECTURE IV. any distinct authority I do not venture to offer any opinion one way or the other. I simply call attention tq the point as one which must not be taken to be concluded by the Full Bench ruling in Haran Chunder Ghose's case. (23 W. R., 186.) It was thought at one time that a creditor whose debt was secured by a mortgage, was bound to pro- ceed in the first instance against the property mort- gaged to him, and that he could only proceed against other properties for the deficiency, should there be any. (Brohmomoyee Debea v. Bykunt Chunder Gangoolly, 5 W. R., Mis., 52.) It is, however, now settled that a mortgagee is under no such liability, and that he is at liberty to proceed against any property belonging to his debtor in the same way as an unsecured creditor, and this right is not qualified, although the decree should say that execution should be first had against the property pledged to the creditor, and afterwards against the person. It is always competent to the creditor to say, " I am con- tent to rest upon the decree which [ have obtained for the money due upon the bond, and to waive the right which I have as mortgagee." (Fakeer Buksh v. Chutterdharee, 14 W. R., 209 ; see also Parmessaree Dossea v. Nobin Chunder Tavan, 24 W. R., 305.) I need hardly point out that these observations do not apply to cases in which the creditor has lost his right either by the operation of ORDER FOR DISTRIBUTION. LCTC*E the statute of limitations, or otherwise to proceed upon the covenant contained iu the mortgage, and is restricted by the decree to proceedings against the land on which the debt is secured. I will now call your attention to section 271 of the Civil Procedure Code a section which I may venture to say is by no means a favorable specimen of legislative workmanship. The section says as follows: "If, after the claim of the person on whose application the property was attached has been satisfied in full from the proceeds of sale, any surplus remain, such surplus shall be distributed rateably amongst any other persons who, prior to the order for such distribution, may have taken out execution for decrees against the same defendant, and not obtained satisfaction thereof. Provided that, when any property is sold subject to a mort- ,e, the mortgagee shall not be entitled to share in any .surplus arising from such sale." Now the first observation which I think it neces- sary to make upon this section is that its language clearly points to a case in which there is a surplus, and there arc rival judgment-creditors among whom it I to be distributed. It has no application where the mortgage is the only creditor who seeks to be paid out of the surplus proceeds as being money pay- able to his debtor in the hands of the Court. In other words, the judgment-debtor cannot object to the mo, 'i demand to be paid out of the surplus RIGHTS OF MORTGAGEE. H9 purchase money. (24 W. R. 305.) The only LECTUBE ground upon which he could do that would be that the mortgagee was bound to satisfy his debt, as far as he could, in the first instance, by the sale of the property pledged to him. But as we have already seen, the mortgagee is not under any such liability, and the result of the recent authorities is that a mortgage creditor is not in a less favorable situation than an unsecured creditor in respect of the pro- ceedings allowed by the law for the purpose of enforcing a judgment for money. The next question which arises upon the section is whether in a contest between unsecured creditors and a mortgagee, where the money in the hands of the Court is not sufficient to pay all the creditors in full, the mortgagee can waive his rights as mort- gagee, and insist upon sharing in the surplus as an ordinary creditor. You will see that the consider- ations which arise here are very different from those which would arise if the contest was solely between the debtor and the creditor. The law seems to be anxious to guard against a wanton sacrifice of the rights of the unsecured creditors, and upon a prin- ciple which has its foundation in equity and good conscience a principle which I shall explain in a subsequent lecture the mortgagee is not permitted to share in the purchase money which is paid, not for the absolute interest in the estate, but only for the equity of redemption. The mortgagee has JOQ ORDER FOR DISTRIBUTION. in his mortgage ample security for the realization i v - of his dues, and his rights are in no way prejudiced by refusing to permit him to share in the surplus proceeds, while very great injustice might be done if a different course were followed. Thus, for instance, suppose an estate is worth Rs. 50,000, and that it is mortgaged for Rs. 25,000. If the estate is sold subject to the mortgage, it will sell only forRs. 25,000, being the value of the equity of redemption. The niortoao-ee is, therefore, sure to s;&t his monev o o o / out of the estate, but suppose he is permitted to share in the surplus proceeds, the result will be that the purchaser will be benefited, and the debtor and liis creditors will suffer to the extent to which the lie 11 is reduced. Thus, suppose the mortgagee gets Rs. 5,000 under an order for distribution. The fund available to the unsecured creditors will be by that amount, while the purchaser under the ration will get property worth Rs. 50,000 for only Rs. 45,000. It seems to me, therefore, not- withstanding certain expressions in the judgment of the Court in Fukeer Buksh v. Chutterdharee (14 \\ . II., t>0!)), which might seem to support a con- trary new, that a mortgagee is not entitled to share in the surplus arising out of the sale of property which is sold subject to his mortgage, i.e., O O / have already explained, when the contest is ii him and the unsecured creditors of the debtor. If there should be any surplus after satis- RIGHTS OF MORTGAGEE. 121 the claims of the unsecured creditors, the LECTURE IV. mortgagee may have a right to such surplus. I have said that the result of the recent authori- ties seems to place the mortgagee's right to proceed against any property belonging to his debtor beyond all doubt. It may, however, be doubted whether the doctrine does not require some quali- fication a qualification which is based upon the same principle which excludes the mortgagee from the benefit of an order for distribution under section 271 of the Procedure Code. I think there can be no doubt that the mortgagee has ordinarily the right to proceed against any property belonging to the judgment-debtor, but should not this right be restricted when the equity of redemption has passed away from the judgment-debtor to a third person. Thus, to take the illustration given in the last paragraph, the purchaser pays only Rs. 25,000 for the property purchased by him, as it is sold subject to a mortgage for Rs. 25,000. Now if the mortgagee is permitted to proceed against other properties, without in the first instance proceeding against the property pledged to him, the purchaser may acquire an estate worth Rs. 50,000 for one-half the sum. It is probable that the judgment-debtor may not be wholly without a remedy, and he will be perhaps entitled to the benefit of the lien, and the equities between the parties may possibly be worked out in a regular suit between the purchaser 16 122 ORDER FOR DISTRIBUTION. ami the debtor. But I think this would be a perfect IV - waste of litigation, and the limitation which I have O ' ventured to suggest on the right of the mortgagee to proceed against his debtor ought to be accepted, if for no better reason, at least for the prevention of that circuity of action which the law is generally supposed to abhor. The legislature also would seem to have guarded against this very evil by refusing to permit the mortgagee to share in the surplus proceeds of property sold subject to his mortgage. for I conceive that even if there had been O O ' 110 such provision, the unsecured creditors would have been permitted to stand in the place of the mort^a^ee to the extent to which the fund to which o o they were exclusively entitled to look for the satis- faction of their dues, was reduced by the action of tin- mortgagee; and this upon a doctrine which is by no means peculiar to any particular system of jurisprudence, but which has its foundation in the broadest principles of equity and good conscience. It may be said that it would be beyond the province of the Court to Impose limitations and restrictions on the rights of creditors which are not to be found iu the. Code of Civil Procedure, but the principle to which I refer is in no .sense whatever a part of the law of jiroceduiv, and its introduction would not, I apprehend. hi- ivirarded as in any way trenching upon the province of the l"-i-l;iture. (Mlrza Futteh "///. r, W. I! . Mis., l;; ; 1 Madras, -4!).) SALE " SUBJECT TO MORTGAGE." 123 The question as to what is meant by "sold LECTURE subject to a mortgage " has given rise to consi- derable discussion. In a recent case, Fakeer Buksh v. Chutterdliaree Chowdhry, the Court observed: " We think that section 271, Act VIII of 1859, or rather the proviso in that section, is intended to apply to a case where the property is actually sold subject to a mortgage, and where the transaction is such that the purchaser is buying the property subject to the mortgage, where he is, in fact, only buying the equity of redemption which remains in the judgment-debtor ; and it does not apply to a case where there is merely the right by law in the mortgagee to enforce his mortgage against the purchaser. This appears to have been the view taken by this Court in a decision reported in 6 Weekly Reporter, Miscellaneous Rulings, page 13. "There the Court says: 'It is not equitable that the purchaser who purchased and paid for only the mortgagor's interest in this property, should hold it released from Gregory's lien.' Now, here it does not appear that the sale to the purchaser was in fact subject to the mortgage. By ' in fact ' we mean that it was not so subject by the contract of sale, and there was merely a legal right existing which might be capable of being enforced. It seems that a petition which was presented by the present appellant was not taken notice of, and neither in the proclamation of sale, nor in any of 124 SIMPLE MORTGAGE. LECTUBE tbe sale proceedings, is mention made of the exist- ence of any mortgage. Nor is there anything to show that only a limited right of the judgrnent- dehtor was to be sold. Therefore, upon that con- struction of section 271, we should say that the proviso does not apply to the present case." (14 W. R., 209-10). According to this decision the mortgagee may share in the surplus proceeds, although the pur- chaser aware that the property was in law subject to a mortgage paid only the price of the equity of redemption, and not that of an absolute interest in the property. If the contest had been between parties who had induced an honest purchaser to lay out money in the bond fide belief that he was purchasing the property free of all encumbrances, such a construction might be supported on the ground that it tended to prevent a circuity of action, for the consequence of refusing the mortgagee to share in the distribution would be to throw him upon the. mortgaged property, with the further consequence that the purchaser would have a right the unsecured creditors to refund a portion the purchase money equal to the amount of the '" But the doctrine of a purchase in good faith for valuable- consideration without notice has not b.-i-n ever applied to a purchaser under an 'ut ion, who purchases only the rights and lllt( ^ debtor, while its extension to every SALE BY MORTGAGEE. 125 case in which no mention is made of the mortgage LECTURE at the time of the sale, would be wholly without - precedent. It seems to me, therefore, with very great deference, that the proposition laid down by the Court in Fakeer Buksh v. Chutterdharee Chow- dhry (14W. R., 209), cannot be supported to its full extent, as the only foundation upon which it could be placed, the prevention of a multiplicity of suits, fails. I say the only foundation, because I think that it is quite clear from what I have said that the doctrine would be open to the same objec- tion as permitting the mortgagee to share when the property is sold expressly subject to a mortgage. I have already said that a sale by an unsecured creditor passes only the equity of redemption. There may, however, be cases in which the pur- chaser acquires a higher right. Thus, for instance, in the case of Mudhusudun Sing v. Mukundloll Sahee (23 W. R., 373), where execution was taken out by one of the creditors against an estate which was subject to a mortgage in favor of another cre- ditor, who also had placed an attachment on the property, and the property was subsequently sold at the instance of the first creditor, but without any mention of the mortgage it was held by the Court that what passed to the purchaser under the sale was not the bare equity of redemption, but the property itself, free of the mortgage held by the other creditor ; and the case of Nadir Hussen 126 ATTACHMENT. i.i,in:i v. llilmn P> nrno (J!) W. R., 255) lays down still IV - more broadly that when an estate is sold pending an attachment by the mortgagee, the lien is transferred from the property to the purchase money, and the purchaser acquires the pro- perty discharged from the lien. The rule laid down in these cases is likely to prevent, in some measure, the evils which attend all sales in exe- cution in this country ; it being by no means an uncommon thing for the same property to be sold successively five or six times, first by an unse- cured creditor, and then by the mortgage creditors of the debtor; the third mortgagee probably com- ing in first, then the second mortgagee, the first mortgagee closing the scene; and this although cution had been taken out and the property attached by all the creditors, when the sale took place at the instance of an unsecured creditor. I shall now refer to another section of the Procedure Code which also has created no little difficulty. I allude to section 270 of the Code. That section says : " Whenever property is sold in execution of a decree, the person on whose application such property was attached shall be entitled to be first paid out of the proceeds thereof, notwithstanding a subsequent attachment of the same property by another party in execution of a prior deer- Now this section in terms gives to the creditor by whom the property is first attached, RIGHTS OF MOETGAGEE. 127 i.e., first made available to the creditors of the LECTURE IV debtor, the right to be paid first. But suppose the property is sold by a mortgagee who comes in after the property has been attached, but whose mortgage is prior to the attachment. It cannot be said that his claims should be postponed to that of the unsecured creditor, and yet the language of the section would seem to leave no discretion to the Court of execution in the matter. It is unnecessary to discuss if this is the right view, for, as explained by the Court in a recent case (22 W. R., 98), the enactment was never intended to alter or limit the rights which a person may have acquired by contract independently of the rules embodied in the Code of Civil Procedure. As the law, therefore, at present stands, the Court of execution is fre- quently obliged to make an order which the Court knows, and which the parties perhaps know equally well, will be set aside in what is called a regular suit. I speak with reserve, but it seems to me that the whole chapter on execution in the Civil Procedure Code relates to sales in execution of decrees for money, and not to sales under decrees for that purpose obtained by mortgagees. The provisions relating to attachments and the language of section 259 of the Code leave on my mind a very distinct impression that the legislature had before them only one class of sales, those in execu- tion of decrees for money. PURCHASE FOR VALUE. ,. BE I will end with a few general observations on the security to which the mortgagee becomes entitled under an ordinary simple mortgage. Now it is ncc( -ss.-iry to bear in mind that a simple mortgage c -rentes a real right, and that the defence of purchase for value without notice is not applicable to a suit by a mortgagee to enforce his security. I have already explained the origin of this doctrine introduced by the English Court of Chancery for the purpose, among others, of guarding against the consequences of treating a contract as a conveyance. It is, therefore, that, as a general rule, the defence is not allowed when the right sought to be enforced is :i legal right, and not one which is recognised onlv by equity. It would be beyond the province of these lectures to explain the doctrine at length, and it I recur to it, it is only because its somewhat indis- criminate application in this country has attracted to it a cloud of prejudice, much of which, when kept within reasonable limits, the doctrine certainly does not deserve. The real truth seems to be that the doctrine is in some measure a 'survival,' and points to times when a conveyance was a transaction which never could take place secretly, while a mere .(incut was not attended with any such publicity. Jn these days, when the title to real property passes by mere writing, a conveyance may be attended with as little publicity as an agreement to transfer B i'u turf time, and it is this feeling apparently EIGHTS OF MORTGAGEE. 129 which has led to the extension of this doctrine LECTUEE iv. to real rights. In all enlightened systems of jurisprudence, however, the somewhat cumbrous formalities which our forefathers insisted upon as a protection against fraudulent practices, are gra- dually giving way to a system of Registration of Assurances. The question whether a security is available against a purchaser from the mortgagor without notice of it, was raised in the Calcutta High Court in the case of Maharajah Moheshur Bux Singh Bahadoor v. Bhikha Chowdhry, and was answered in the affirmative. Sir Barnes Peacock, in giving the judgment of the Full Bench, observed: "As to the second ground which has been raised for our opinion, namely, that the purchaser under the bill of sale was a bond fide purchaser without notice, and there- fore entitled to priority, if the bond was really and bond fide executed before the date of the defend- ant's purchase, it would primd facie be entitled to priority, and the defendant could not, according to the decision in the case of Verden Seth Sam v. Luckpathy Royjee Lallah (Marshall's Reports, p. 461), succeed without proof that he was a bond jide purchaser for value without notice. But even if the defendant were to satisfy the Court upon that point, he would not, in my opinion, be entitled to priority, unless the plaintiff was bound to give notice of his bond. If he was not bound to register 17 130 PURCHASE FOR VALUE. IUK it in order to retain priority over subsequent pur- IV - chasers for value, I do not see what notice lie could give, or was bound to give. The mere charge upon an estate does not give a right to the possession of title-deeds; and even if it would, the plaintiff in the present case had a charge, not upon the entire estate, but only on one or two villages, which would not give him a right to the possession of the title-deeds to the whole estate. " But if the defendant should prove that he was a bond fide purchaser for value, he would throw the onus on the plaintiff of proving that he actually advanced the money as alleged in the bond creating the charge, and that the bond was executed before the defendant's purchase." (5 W. E,, 63. See also 4 Madras, 434; 5 Madras, 457.) Mr. Justice Campbell, who was of a different opinion, pointed to the " frightful consequences which may result if it be established as law that a lien on real property without either publication or ion will suffice to defeat the most cautious purch:iMT." "I should fear," adds the learned .Indue, "that in this country the result would be an entire insecurity of title; that it would be impossible for any man by any amount of caution to buy real property with any confidence or any secu- r ". v th;i : lion-holders may not startup with documents (or possibly even asserting verbal engage- ment.-) proved, as proof here goes, and which he STATUTE OF LIMITATIONS. 131 cannot disprove, and may defeat or harass him." LECTUKE (5 W. R., 67.) It is impossible to deny that there is a good deal of truth in these observations. In countries where the Roman doctrine of hypothecation obtains, the evil is guarded against by the device of public hypothec books, and the same purpose is served by the new system of registration which has been introduced into this country since the passing of the 16th Act of 1864. The fact that hypothecation confers a real right seems also to have been overlooked in some of the earlier cases on the Statute of Limitations, in which it was held that a mortgagee was bound to enforce his security within the time limited to suits for breaches of contracts. (Seetul Sing/i v. Baboo Sooraj Bux, 6 W. R., 318, since overruled. See Sarwar Hossein v. Shazada, Golam Mohamed, 9 W. R., 170.) In the last case it was held that a suit to enforce a security is a suit to recover an interest in immoveable property within the mean- ins; of clause 12 of the first section of Act XIV of O 1859. It must not, however, be understood that the same extended period was allowed to the mortgagee to sue on the covenant which must be enforced within the same period as any other contract. (10 W. R , 379 ; 10 W. R., 56.) The new Limitation Act has, by Art. 132, Schedule II, expressly provided for suits " for money charged upon immoveable DECREE FOR SALE. property," find the period of limitation is stated to be twelve years from the time when the money becomes due. It would seem, although the language is not verv precise, that, as under the old law, the remedy on the covenant must still be sought within the period limited for contracts. It follows from what I have said as to the nature of the right created by a simple mortgage, that a suit to enforce the security must, like any other suit for hind, be brought in the Court within whose juris- diction the land is situated, although the remedy against the person may have to be sought in a different forum. There is indeed a case at 9 Bombay, page 12, in which a different view is taken, but I presume it cannot be supported. (See 18 W. R., 269; 18 W. R., 287.) As the law was understood before the Full Bench ruling in Haran Cliunder Ghose's case (23 W. R., 187), it was of the utmost importance to the plaintiff to bring his suit in the proper Court, as no other Court than that within whose jurisdiction the land was situated, could make a decree expressly directing a sale of the mortgaged property ; ami this declaration was always sought by the mortgagee, although the mortgagor had not in any way parted with his interest in the property either by a sale or a second mortgage. It is true that, under a recent ruling of the Calcutta High Court, a mere money decree is, as between the parties, id as a decree for sale, but the mortgagee DECREE FOR SALE. 133 would certainly act safely in expressly asking for LECTURE the usual decree for sale, which, as I have already - explained, can only be made by the Court within whose local limits the land is situated. LECTURE T. Conditional sales Differences in form between conditional sales and English mortgages Difference between mortgages by conditional sale and sales with clause for repurchase Mortgagor does not generally incur any personal liability Construction of the Sudder Dewany Adalut True meaning of "construction" Implied war- ranty of title by mortgagor- -Remedy for breach of warranty Remedy of mortgagee when pledge is accidentally destroyed Princi- ple on which damages should be assessed Right of mortgagee to prevent waste when security is insufficient Reg. XVII of 1S06 Process of foreclosure in Bengal Meaning of " stipulated period," " legal representatives" Duty of Court on receiving application Pro- vinous of Regulation mandatory and not merely directory Distinc- tion between mandatory and directory enactments Proceedings under Regulation merely ministerial Regular suit Process of fore- closure elsewhere than in Bengal Moulded on the practice of the English Court of Chancery Right of mortgagee to possession immediately on default How far qualified in Bengal by Regulation XVII of 1806 Limitation Acts XIV of 1859 and IX of 1871. A MORTGAGE by conditional sale is, as its name denotes, a conditional conveyance of land as a security for the repayment of a loan "with a stipu- lation that, if the money borrowed be not repaid with or without interest by a certain day, the sale shall become absolute." It resembles very closely in form an Kn^lish mortgage, both of them belong- in u r to that class of securities in which the property 1'1<-: liable to pass from the debtor to the litor on default. There is, however, some MORTGAGE BY CONDITIONAL SALE. 135 difference in the form of the instruments. In an LECTURE v. English mortgage the ownership is wholly trans- ferred to the creditor, liable, however, to be divested by the repayment of the loan on the appointed day. The English mortgagor says to his creditor, " I sell my property to you, but if I repay the debt by a certain day, the conveyance shall be void or (as is now more usually the case) you shall reconvey the property to me." In the Indian mortgage, on the other hand, the creditor acquires only a qualified ownership, which, however, by the terms of the agree- ment ripens into absolute proprietorship immediately on default. In the English mortgage, therefore, the mortgagee, by the terms of the agreement, has the right to enter upon possession of the property mortgaged to him immediately upon the execution of the deed, but the mortgagee under a conditional sale can have no such right. The possession of the mortgagor is, therefore, generally protected in an English mortgage by a covenant for quiet posses- sion till default, a covenant which would be wholly superfluous in an Indian mortgage, for the simple reason that with us only a qualified ownership passes to the mortgagee, which before default does not carry with it the right to the possession of the property. A practice, however, obtains in this country, which also seems to have prevailed in England in former times, by which the debtor executes a deed purport- 136 SALE WITH CLAUSE FOR REPURCHASE. LECTURE ins; on the face of it to be an absolute conveyance, y the creditor, on the other hand, engaging to recon- vey the property to the debtor on repayment of the loan. In such cases the conditional sale differs but very little in form from an English mortgage. The practice, however, is open to very serious objec- tion, and is gradually dying out. In the case of Rajah Heera Singh (N. W. P., Vol. VIII, p. 564), where there was an absolute sale together with an agreement by the purchaser to reconvey the property, if the purchase money, toge- ther with interest, were paid by a certain day, it was contended that the transaction between the parties was not a mortgage, but only " a redeemable sale," and, therefore, not subject to the rules relating to mortgages. The Court, however, held that a redeemable sale was identical with a mortgage, and that the vendor in a redeemable sale had an equity of redemption which must be foreclosed in the same way as in an ordinary mortgage. (See also Annnn Pandt'i/ v. Norrotun Koonwar, 3 Sel. Rep. 78.) There can be no doubt that the case was rightly (Irri.K-d, but the proposition about "redeemable Bales" is stated in terms which are somewhat broad. It is true that the rights of ni" r may not be defeated under color of a iv.lrrmabh; sale, but care must be taken to dis- a inoi-imi-c from a bond fide sale with a SALE WITH CLAUSE FOR REPURCHASE. 137 clause for repurchase. The two things resemble LECTURE one another closely in form, but differ widely in their incidents. If there is a bond Jide sale with a condition for repurchase, the power must be exer- cised strictly in compliance with the terms of the condition, while in the case of the mortgagor, a failure to fulfil the strict terms of the agreement O is not immediately followed by a forfeiture of the property. The reason of this difference is, that in the case of a bond fide sale with an option to the vendor to repurchase within a given time, there is no equity whatever to relieve against the sale, the rights of the purchaser being entitled to protection equally with those of the vendor; while in the case of a mortgage the transaction is regarded only as a security, and the mortgagee is sufficiently compen- sated by receiving interest in default of payment at the appointed time. The distinction is illus- trated in several English cases, in which Courts of Equity, notwithstanding the jealousy with which such transactions are viewed, have refused to relieve the vendor from the consequences of his own default, and has been acted upon by our own Courts in more than one reported case. (Rajah Lakshmi Chelliah Garu v. Rajah Sri Krishna, 7 Mad., 6; Venkappa Chetti v. Akku, 7 Mad., 219.) It is not perhaps always very easy to determine the class to which a particular transaction belongs. The question always is, was the transaction a bond 18 138 DISTINCTION BETWEEN A MORTGAGE cm fide sale with a contract for repurchase, or was it a under the form of a sale ? In this, as in every other case, the intention of the parties must be looked to, and that intention may be shown by the deed itself, by other instruments, or even by oral evidence. (Alderson v. White, 2 De and J., 97; see also Nallana Gaundan vs. Palani Gaundan, 2 Mad., 422. ) The test sometimes applied by English Judges, viz., the existence or absence of a power to recover the sum named as tlie price for the repurchase, cannot safely be applied in this country, because, as you will presently see, there is in general no personal liability incurred by the debtor in a mortgage by conditional sale. There are, however, other circumstances which may fur- nish a key to the real character of the transaction. If, for instance, the conveyance is not followed by possession, or if there is any covenant for the pay- ment of interest, I presume the transaction will be regarded as a mortgage, while, if the purchaser is let into possession as owner with no power to recover interest upon the purchase money paid by him, tin: instrument will be regarded as an absolute ith :m option to the vendor to repurchase. It i<. no doubt, possible to suggest a case in which the creditor might agree to take the rents and pro- in lieu of interest, and conceal the real nature lion under the appearance of a sale isc for repurchase, but even in this case AND A SALE WITH CLAUSE FOR REPURCHASE. 139 the adequacy or inadequacy of sum mentioned in LECTUBE the instrument as the purchase money would per- - haps throw some light on the transaction. " The intention of the parties, as collected from the tenor of the deed, shows whether the bye-bil-wafa be a sale with the reserve of an option of retractation within a limited time, or a mortgage for the security of money lent. A stipulation for a short period must be considered to mark that a sale was in the con- templation of the parties ; a long term denotes a mortgage, or security for a loan, and such mort- gages, in the form of conditional sales, are very common." (Note I, Select Reports, p. 77 ; compare 7 Mad., 6, and 7 Mad., 219, with 2 Mad., 422.) I shall close the subject with the remark that in doubtful cases the Court will lean strongly to the construction most favorable to the person claiming the right to redeem. There is a kind of mortgage much in use in the provinces of Bombay and Madras to which I have already had occasion to allude. The Dristibund- huk is in its nature essentiallv the same with our */ own conditional sale, the debtor agreeing with his creditor to put him in possession on default of the property pledged to him as absolute owner. The Gahen Lahen of Bombay is also analogous to our conditional sale, and I propose to treat of all of these varieties of mortgages in the present lecture as they belong to the same group of securities in PERSONAL LIABILITY OF MORTGAGOR. LECTI-BE which the ownership of the pledge is liable to be 1 transferred from the debtor to his creditor. I intend, in the first place, to call your attention to the rights acquired by the mortgagee under a con- ditional sale, although the mutual rights and duties of mortgagor and mortgagee are so interwoven with one another that I cannot discuss the rights of the mortgagee without in some measure touching upon those of the mortgagor. Now the first observation which I think it neces- sary to make is, that in a conditional sale the mort- gagor does not ordinarily incur any personal liabi- lity. The creditor can only look to the land pledged to him for the satisfaction of his debt. If the debtor make default, he may foreclose the equity of redemption and become the absolute owner of the estate. If the property is worth less than the amount due to him, he must suffer the loss, and cannot enforce payment from the debtor. This was laid down in a very early " construction " by the Sudder Dewany Adalut of Calcutta, and this \i-\v of the law has not, so far as I am aware, been since questioned. The "construction" says " If the IIK.I tLia.uc be of the nature of a conditional sale .-ind the money be not repaid, the lender, unless good and sufficient cause be shown, can only sue for lesaioo of the property pledged, and lias not the elcrtiou ,,f siiin-- for the money or to be put in of the property as he may deem most DEFINITION OF CONDITIONAL SALE. 141 advantageous to his own interest." (Vide Select LECTURE Reports, Vol. VII, p. 92.) The language is not perhaps very precise, and it would seem that the proposition that the mortgagee must ordinarily look to the land is somewhat broadly laid down. The question, I presume, must depend upon the particular language of the instrument, and all that can be affirmed as a proposition of law is, that personal liability shall not be presumed in the absence of an express covenant. Thus qualified, the proposition would not seem to be open to any rea- sonable objection. Possibly this was all that was meant to be laid down in the construction, although the language used might have been more precise. I have in my own experience found very distinct covenants for repayment in Bengali mortgages, and it would not, I conceive, be just to say to the mortgagees in such cases, " You must not sue upon the covenant, but must proceed to foreclose the equity of redemption." I find that Mr. Justice Macpherson in his treatise on Mortgages defines a conditional sale as a mort- gage, in which " the borrower, not making himself personally liable for repayment of the loan, cove- nants that, on default of payment of principal and interest on a certain date, the land pledged shall pass to the mortgagee." (Macpherson's Mortgage, p. 11.) This definition, or rather description, of a conditional sale, is taken from the judgment of the 242 WARRANTY OF TITLE. LECTURE Court in a very early case in the Sudder Dewany JL Adalut. But the learned author does not express any opinion of his own. In making the foregoing observations, I must not be understood as expressing an opinion that the mortgagee will be permitted in this country to pur- sue all his remedies concurrently, or that he may not be put to his election. The case of Mohanund Chattel -jee v. Govind Nath Roy (7 Sel. Rep., 110) is a direct authority that a mortgagee having elected to foreclose will not be suffered to sue the mortgagor personally for the debt secured by the mortgage. The question whether or not there is an implied warranty of title in a mortgage by conditional sale, is perhaps not wholly free from doubt. In the case of an out-and-out sale of immoveable property, there are conflicting dicta, if not decisions, and I presume the same uncertainty must extend to the case of a mortgage. The weight of authority, however, so far as mortgages are concerned, seems to be in favor of the existence of an implied warranty. (Dwnrka Dass against Rutton Si/i^/i, - Agra, 119.) The question, however, is not of much practical importance, as there are few mortgages in which some expressions may not be found ufficient to constitute an express warranty of title. '1 iie question next arises what is the remedy of the mort-agee if the title of the morto-a^or is found ** **-' O O to be bad. This is pointed out by Mr. Justice REMEDY OF MORTGAGEE. 143 Markby in delivering the judgment of the Court in LECTURE Syud Sayet All v. Syud Mohamed Jowad AIL - In that case the title of the mortgagor having proved defective, the mortgagee brought a suit, in which, after stating the result of a certain action between the mortgagor and a third person, in which such third person was declared to be the owner of the pro- perty which had been mortgaged to the plaintiff, the plaint proceeded to state " Hence, the right of Sayet Ali ceased to exist, and he held no longer any lien on the property sold. That for this reason your petitioner has become entitled to recover the consideration money with interest accrued thereon." (7 W. R., 197.) The plaint was filed on the 20th February 1864, before the time fixed for the repayment of the loan had expired. The defendant in his answer insisted that the suit was premature, as it was substantially a suit for the money which had been advanced, and which had not become due when the plaint was filed. Mr. Justice Markby, in overruling the objection, points out the real nature of the suit. The learned Judge observes, " With regard to the defence that the action is premature, because the time for repayment of the loan has not elapsed, we think that it is not well founded. The defendant has misunder- stood the cause of action ; it is not brought to enforce repayment of the loan, but it is an action for damages for breach of contract. A warranty of ] 1 }. DESTRUCTION OF PLEDGE. LECTURE title amounts to a contract by the seller that, in consideration of the buyer purchasing the property and pay the consideration money, he (the seller) will make good to the buyer any loss which the buyer may incur by reason of the seller not having a uood title to the property. This is an absolute con- tract from the moment it has been entered into, and the buyer can sue upon it at once, if he can show that the seller has not a good title in accordance with his undertaking, and that he has sustained loss in consequence." (7 W. R., 196.) Further on the learned Judge observes, " It is perhaps desirable to point out that though, as above stated, the buyer may at once bring an action on a warranty of title, if he can show a breach of that warranty, it does not follow, as a matter of course, that he is entitled to recover back as damages the whole of the considera- tion money. Nor do we assent to an argument which has been put forward on the part of the plaintiff, and has received some countenance from the Princi- pal Suddcr Aineen, that, on its being ascertained that tin- seller had no title, the conditional sale was (to use the expression of the judgment below) nult(fied" (1 \Y. i;., I!.H;.) We thus find that the mortgagee ha- a right to bring an action for damages if the title of the mortgagor is found to be bad. The remedy of the mortgagee, is not quite so clear when the pledge i> ( 1 by what is called an act of God, or suffers deterioration so as to become insufficient for the ASSESSMENT OF DAMAGES. 145 security of the creditor. I have not been able to LECTURE v. find any reported case on the subject, although I find it difficult to persuade myself that the precise point never came before any of the superior Courts in this country. We have already seen that the Hindu law in such cases permitted the creditor either to demand another pledge or to sue the debtor immediately for the debt secured by the pledge. A similar right is given by the French Code Napo- leon, and I may, therefore, venture to affirm that the principle will be adopted by our own Courts as founded in justice and equity, and open to no reason- able objection. While upon the subject I may venture to suggest that a similar rule may perhaps be applied with advantage to cases in which the mortgagor's title is found to be bad. It is perfectly true that the credi- tor would be sufficiently protected by permitting him to sue for damages for the breach of the warranty, but I think there would be very great difficulty in assessing the damages. As pointed out by the Court in Sayet AH v. Mohamed Jowad All (7 W. R., 19o), it does not follow that the mort- gagee is entitled to recover as damages the whole of the "consideration money." For the purpose of this enquiry, I shall assume, as the Court apparently did in the case to which I have referred, that this would be one of those cases in which the mortgagor would be personally liable; for otherwise 19 ] },; ASSESSMENT OF DAMAGES. run there can be no doubt that the mortgagee would be at least entitled to recover as damages the whole of the money lent by him. The question then arises what, assuming that the mortgagor is liable to be sued upon his covenant, is to be the measure of damages for the breach of the warranty. Now the principle on which the damages ought to be assessed would seem to depend upon the difference to the creditor in the risk incurred by him under the altered circumstances, and this difference ought to be the measure of the damage suffered by the creditor. Now the differ- ence in the risk is, I apprehend, capable of a money valuation in this way. What would be the rate of interest which the creditor would demand if the money were advanced on the personal security of the debtor? and the difference between this hypothe- tical rate and the rate at which the money was actually lent, would represent the loss to the creditor, not indeed with mathematical certainty, but with that substantial accuracy which is alone attainable in such 'S. It is, however, evident that the principle can- not be worked out satisfactorily in practice. It would impose upon the Courts of Justice a duty which it would be next to impossible for them to perform. There can therefore be no serious objec- ii to the extrusion of the rule that where by reason ;ii accident the mortgagee loses the benefit of the security, the mortgagor is bound either to repay the RIGHT OF MORTGAGEE TO PREVENT WASTE. 147 debt, or to give another pledge. The debtor surely LECTURE cannot complain with reason of being obliged to repay, before the appointed time, money which would perhaps have been never lent to him but for his offer of a security which turns out to be worthless ; while the creditor will be only too glad to call in his money. In the case of an out-and-out sale the difficulties which I have suggested do not occur, but I think it would be unsafe to apply the same rule to a transaction which is essentially different, and which must, therefore, be governed by other rules. In the foregoing observations, I have confined myself to the rights acquired by the mortgagee immediately on the execution of the mortgage, and before any default has been committed by the mort- gagor. In connection with this subject I may mention that, although the mortgagor is treated as the owner of the land before foreclosure, the mortgagee has the right, where the security is insufficient, to ask the Court to interfere to prevent waste by the mort- gagor. I have not indeed been able to find any Indian case directly bearing upon the point, but the rule is founded in good sense, and there can be no possible objection to its application in this country. I shall now proceed to discuss the rights of the mortgagee after default made by the mortgagor to repay the debt by the appointed time. If we were EQUITY OF REDEMPTION. LECTUBE to look only to the terms of the contract between '- the debtor and his creditor, the ownership passes absolutely to the creditor immediately on default, and this would seem to have been actually the case in this country before the legislature interfered and engrafted on, what I may call, the common law of India, the rule borrowed from the practice of the Knglish Court of Chancery, by which the mortgagee is permitted to redeem within a reasonable time after he has forfeited his rio;ht to do so bv the o / terms of his own agreement. The preamble of Regulation XVII of 1806, which was passed for the Presidency of Bengal, points out the neces- sity of " an equitable provision " for allowing a redemption within a reasonable and limited period, as the only means of guarding against impro- vident and injurious transfers of landed property by the forfeiture of mortgages accompanied with a condition of sale. In the other provinces the legis- lature does not seem to have thought it necessary to interfere, but the same result has been accom- plished by what is called, not perhaps very felici- tously, judicial legislation. I propose in the first place to call your atten- tion to the provisions of the Bengal Regulation, by which the m \\as prevented for the first time from insisting upon a strict enforcement of the of his contract with the mortgagor. The HUl in order that he may become the BENGAL CODE. 149 absolute owner of the property pledo-ed to him, LECTURE must proceed to foreclose the right of redemption, and the procedure which he has to adopt is pointed out by the 8th section of the Regulation, which says: "Whenever the receiver or holder of a / deed of mortgage and conditional sale, such as is described in the preamble and preceding sections of this Regulation, may be desirous of foreclosing the mortgage, and rendering the sale conclusive on the expiration of the stipulated period, or at any time subsequent before the sum lent is repaid, he shall (after demanding payment from the borrower or his representative) apply for that purpose by a written petition, to be presented by himself or by one of the authorized vakils of the Court to the Judge of the zillah or city in which the mortgaged land or other property may be situated. The Judge, on receiving such written application, shall cause the mortgagor or his legal representative to be furnished, as soon as possible, with a copy of it, and shall at the same time notify to him by a purwana under his seal and official signature, that, if he shall not redeem the property mortgaged in the manner provided for by the foregoing section within one year from the date of the notification, the mortgage will be finally foreclosed, and the conditional sale will become conclusive." The preceding section declares the mortgagor entitled to redeem on payment of the principal 150 "STIPULATED PERIOD." LECTURE sum with the interest due thereon. Now the y language of this section has given rise to a good deal of discussion, and I cannot do better than call your attention to some of the questions which have arisen upon it from time to time. In the case of Shoros/iee Bala Dabee and others v. Nund Lall Sein (13 W. R., 364; S. C.. 5 B. L. R., 389) the question arose as to the meaning of the words "stipulated period" which occur in the eighth section of the Regulation. The facts in that case were shortly these. On the 4th of September 1863, Shoroshee Bala Dabee and her son Hemendro Nath Mookerjee executed a mortgage of certain landed property at Chittagong to one Gobiud Chunder Sein. The deed was in the English form, and by it the property was conveyed to Gobind Chunder absolutely, subject to the proviso that in the event of the mortgagors paying Gobind Chunder the prin- cipal sum ofRs. 54,437-10-4 on the 4th Septem- ber 1868, and in the meantime paying interest on that sum at 10 per cent, per annum half-yearly, (i.e., on the 4th March and 4th September), with annual rests in the case of default of such payment, then and in such case Gobind would reconvey. The mortgagors failed to pay all the interest \vhick became due under the terms of the mort- gage, and on the 4th December 1866, Gobind Chunder applied by written petition to the Judge of Chittagong for a foreclosure of the mortgage pur- " STIPULATED PERIOD." 151 suant to the provisions in that behalf of section 8 LECTURE of Regulation XVII of 1806. Thereupon, the pres- cribed notification seems to have been made to the mortgagors by the Judge. Upon the footing of this petition and notification, Nund Lall Sein, the son of Gobind Chunder, on the 15th April 1868 (his father having meanwhile died), instituted a suit for the establishment and confirmation of absolute purchase and to obtain possession of the mortgaged property accordingly. It is obvious from this statement of the facts of the case that the application to foreclose, as well the suit based upon it, were instituted before the period fixed for the repayment of the loan secured by the mortgage had elapsed. It was contended for the plaintiff that the suit was not premature, as, according to the terms of the deed, the defendants had lost their right to ask for a reconveyance; and the Regulation was never intended to give a right to the mortgagor other than a right to redeem within a certain time, even after he has lost all right to the property under the strict terms of the contract, and that the stipulated time within the meaning of the Regulation had therefore arrived as soon as there was a breach by the debtor. The contention, however, was overruled, and the Court in giving judgment observed : " If the Zillah Court was at liberty, and had the machinery to deal with this matter precisely upon the principles which 1.V2 PRACTICE OF EXGIJSH COURT OF CHANCERY. LECTCRB govern the English Court of Chancery, the facts of the case are possibly such as would give the plaintiff a right of suit even before the expiration of the time agreed upon for repayment of the prin- cipal debt. For, whenever that has occurred by reason of which the mortgagor has lost his right under the deed to call for a reconveyance of the property, and he can only get back the mortgaged premises bv virtue of the right of redemption which the Court of Equity still preserves to him. then also that Court allows the mortgagee to come in and insist that the mortgagor shall elect between the exercising of this right of redemption and being foreclosed. But we think that this mortgage trans- action, notwithstanding that it wears a completely English aspect, falls within the operation of Regu- lation XVII of 1806. It is in all respects parallel with the mortgage common in this country, which is effected by means of a bill of absolute sale, .ther with a contemporaneous ekrar for recou- m ; and mortgages of this sort have always M being subject to the Regulation. The words 'conditional sale' as explained by the amble, are broad enough to cover them, and there is no doubt that they are especially within the mi nst which the enactment was directrd. This being so, the mortgagee can only iin a foreclosure by following the procedure \\hicu is laid down by section 8 of the abovemeu- "STIPULATED PERIOD." 153 tioned Regulation. And although there is some v. ambiguity in the words of that section relative to the time when the mortgagee may first prefer his petition for foreclosure, this is cleared up by refer- ence to the previous section. The last clause of the 7th section runs thus : ; * The whole of the provisions contained in section julation I of 1798, and section 12. Regulation XXXIV of 1803, as applied therein to the stipulated period of redemption, are declared to be equallv applicable to the extended period of one year granted for an equitable right of redemption by this Regulation." " This makes it evident that the year of grace, commencing as it does with the notification which follows on the mortgagee's application' for foreclo- sure, is intended by the Legislature to be additional to the period which is stipulated for redemption in the mortgage contract ; and, therefore, it follows that the application itself cannot be made before the expiration of that ; stipulated period.' " Now the stipulated period of redemption referred to by the Legislature in this Regulation appears to us to be die whole period prescribed by the mortgage contract for the performance of the conditions, upon the fulfilment of which the mortgagor is to be entitled to a reconveyance. We do not think that it in any case means less than this, or depends upon whether the mortgagor dulv performs all those i 154 "STIPULATED PERIOD." LECTITBE conditions or not. We see no reason for supposing that the Legislature by those words spoke, not of the period of redemption originally specified in the contract (as the words themselves certainly imply), but merely of the shorter period during which the mortgagor by performance of the conditions may have preserved his strict right to redeem under the contract. " From the very object of the Regulation it is obvious that the franiers of it had expressly in view the case of a mortgagor who fails to perform the conditions necessary to give him the contract right to redeem, and if they thought of the ' stipu- lated period' as a period terminating in the first default of the mortgagor, they would surely have used some apter expression than this to convey their meaning. " According, then, to our view, in the case before us the ' stipulated period ' did not expire until the 4th September 1868, and consequently both the presenting of the petition for foreclosure and the ill ing of this plaint occurred before the mortgagee had any right to take a single step towards fore- closing the mortgagor's equity of redemption. All the proceedings in this matter are, therefore, inopera- tive : the suit is without legal foundation and must be dismissed." (13 W. R., 364; S. C., 5 B. L. R., 380.) I shall presently ask you to contrast the case of RIGHT OF MORTGAGEE TO CALL IN MONEY. 155 Shorosliee Bala with another recent case in which LECTUEK v. also a question arose as to the meaning of the words " stipulated time." But before I do so I wish to make one observation. The Regulation seems to provide only for that class of mortgages in Bengal in which a forfeiture takes place by reason of the "money advanced not being repaid within a stated period," and although it is perfectly true that a forfeiture for breach of any other condition is equally within the mischief of the Act, the statute does not in terms embrace such cases. According to the law as administered in the English Court of Chancery, and which is followed in the other provinces, the mortgagee is entitled to sue at any time after default in payment of interest, where his right to do so is not qualified by a cove- nant not to call in the money during a certain period. As the law, however, stands at present in this Presidency, the mortgagee cannot call upon the mortgagor to elect between exercising his right of redemption and being foreclosed at any time before the period fixed for the repayment of the loan secured by the mortgage, whatever may be the nature of the covenants contained in the deed. The case of Omachurn Chowdhry against Behary Lall Mookerjee (21 W. R., 274), however, shows that the object of the mortgagee may be indirectly accomplished by the fixing of an early date for the "STIPULATED PERIOD." LECTUBE repayment of the money, followed by a covenant that v the money shall not be called in for a certain term if the interest is paid regularly, and the other cove- nants observed by the mortgagor. The distinction may seem to be somewhat refined, but it seems to be the only way in which the rights of the parties can be reconciled with the enactments contained in the ijengal Regulation. In the case of Omachurn Chowdhry against Behary Lall Mookerjee, the question arose upon a mortgage deed in the English form by which the 3rd of January 1866 was fixed as the date for the repayment of the loan. This was, however, accompanied by a proviso that in the event of the debtor continuing to pay the interest on the principal sum regularly, the money should not be called in by the creditor before the 3rd of July 1871. The debtor having failed to pay the interest regularly, the mortgagee proceeded to foreclose under Regulation XVII of 1806 without waiting till the extended period mentioned iu the proviso. It was contended for the mortgagor that the application was premature, as the 3rd of July 1871 was the "stipulated period" for the repayment of the loan within the meaning of the Regulation. The contention, however, was overruled, the Court observing that the last clause in the deed had not the effect of making the 3rd of July 1871 the stipulated period to which the Regulation would to the case of Shoroshee Bala, ENGLISH MORTGAGES. 157 Chief Justice Couch, who gave the judgment of the LECTURE Court, observed, " That is a different case from the present ; and the decision rather supports the view which we take in this case, namely, that we are to look at the time which is stipulated for the payment of the principal sum, and that the intention of the parties is to be collected from the whole of the deed. To my mind, in all these cases, it is a ques- tion of intention, what have the parties fixed upon as the time for payment." You will see that Sir Richard Couch says that the question is one of intention. This is no doubt perfectly true, and yet the language is some- what misleading. In English mortgages a very early day is generally appointed for the repayment of the loan, but it is seldom "intended" that the principal is to be paid on the day named in the condition. Now, suppose the question arose under the Regulation, whether or not the day named in the deed was that which the parties intended to be the stipulated time for repayment; I suppose the question would be answered in the affirmative, although in a certain sense it might be said that the parties knew very well that the repayment of the loan would not be insisted upon on the very day mentioned in the deed. The fact is, the words "intended" and " intention " are somewhat ambiguous, and, unless clearly explained, apt to be misleading. To return to the provisions of section 8 of 158 "LEGAL REPRESENTATIVE." I-BE Regulation XVII of 1806. We find that the applica- '- tion must be preceded by a demand for payment. It is, however, not necessary that the demand should be for the specific sum which may be ultimately ascertained to be due. (Forbes v. Amerunnissa, 10 Moo. Ind. A pp., 340.) Indeed it is very doubtful whether a foreclosure, otherwise regular, can be questioned merely on the ground that it was not preceded by a demand for payment. The section then points out the Court to which the application should be made, and the only point which it is necessary to notice on this part of the enactment is, that where the properties are situated in two districts, the application may be made to either of the Judges within whose jurisdiction the property or a portion of it is situated. (Rashmonee Debea v. Prankissen Doss, 4 Moo. Ind. App., 392.) The statute next defines the duty of the Judge on receiving the application, who is directed to cause the mortgagor or his legal representative to be furnished with a copy. Now the expression "legal representative" has given rise to a good deal of discussion. The earlier authorities were all reviewed in Gunga Gobind Mondul v. Banee Madhub (iliose. (11 W. R., 548; S. C., 3 B. L. R., 172), in which the question was whether the pur- chaser of a portion of the mortgaged property I (lit it k-d to notice. Mr. Justice Markby, in dei the judgment of the Court, observed: PURCHASER OF MORTGAGOR'S RIGHTS. 159 " The question turns entirely on the construction to LECTUBE be given to the words 'legal representative' in Regulation XVII of 1806. In the first place, it is contended broadly that those words did not mean the legal representative of the mortgagor in respect of the particular property mortgaged, but universal legal representative, such as an heir : and there is no doubt some color for this contention. These words are sometimes used in the latter sense, as for instance, in section 210 of the Code of Civil Procedure, and this is the idea which these words would at first sight rather suggest to my mind. But it appears to me to have been settled by long practice and authority that they were not used in this Regulation in this sense. The late Sudder Court held that the purchaser at a sale in execution of civil process is entitled to notice, and that doctrine has, I believe, ever since been acquiesced in. Now, this completely negatives the con- struction contended for. An auction-purchaser, as he is called, is not the universal legal representa- tive of the mortgagor ; he is only the assignee of a portion of his property. " It also appears to me to have been decided by a great preponderance of authority in this Court (although I admit that the decisions are not alto- gether reconcilable), that a purchaser out-and-out of the mortgagor's interest, whether by public or private sale, and whether he be in possession or not, 160 PURCHASER OF MORTGAGOR'S RIGHTS. ; -RE must be served with notice, except where any aliena- tion of the mortgagor's interest has been prohibited bv contract between the mortgagor and mortgagee. It is not necessary to go through the cases which are all collected in Macpherson on Mortgages, 5th rdition, page 179. " Nor do I think that there is any ground for put- ting upon these decisions the restrictions which have been now contended for, namely, that they do not apply to cases where the whole of the property comprised in the mortgage has not been sold by the mortgagor, or to cases where the mortgagee has no notice of the subsequent sale, both which pecu- liarities are said to be found in the case now under consideration. I do not see that a purchaser out and out of a distinct and definite portion of the pro- perty is in a different position from a purchaser of the whole. And as to the question of consent, I see no ground whatever for introducing that consi- deration. If, as is now decided, the words 'legal ' o representative ' include an assignee of the mortgaged property, it appears to me that they must include all suck assitrnees, and that to make a distinction let \\rni a>-i - iiincnts to which the mortgagee has or o o O not consented, would be an unwarrantable addi- tion to the provisions of the Legislature." We thus find that a purchaser of a part of the '" property is a legal representative equally with an assignee of the whole of the property. In "LEGAL REPRESENTATIVE." 161 the case of Mohun Lall Sukul v. Brojonath Kundu LECTURE (10 Moo. Ind. App., 1), the words were construed in a still more extended sense. In that case the mortgagee, after an unsuccessful attempt to withdraw an attach- ment which had been taken out against the mort- gaged property by a judgment-creditor of the mort- gagor, applied to the District Judge for foreclosure under Regulation XVII of 1806. The notice of foreclosure was served only on the widow and heiress of the mortgagor, and not on the creditor by whom the property had been taken in execution. The property was subsequently sold under the attach- ment which had been unsuccessfully contested by the mortgagee, and the purchaser under the execu- tion, as the assignee of the debtor's equity of redemption, brought a suit for possession against the mortgagee upon the ground that the mortgage debt had been paid off from the rents and profits of the mortgaged property. The mortgagee in his defence relied upon the proceedings taken by him under the Regulation, and contended that the equity of redemption had been foreclosed. The Privy Council, however, were of opinion, that there was no valid foreclosure as no notice had been served upon the attaching creditor; Lord Justice Knight Bruce who delivered the judgment of their Lord- ships, observing that the mortgagee, when he filed his application for foreclosure, not only had notice that the interest of the mortgagor had been taken 21 JUDGMENT CREDITOR OF MORTGAGOR. UBE in execution, but was actually disputing the right of y L the creditor to put up that interest to sale. Under such circumstances his Lordship thought that the notice ought to have heen served on the decree-holder, adding, " It was quite clear upon the authorities that if the sale had taken place before the application for foreclosure, such application could not have been effectual unless the purchaser had been served with it." This reference to the peculiar circumstances of the case would seem at first sight to suggest that it was not decided solely with reference to the meaning of the words "legal representative" in the Regulation, but this decision must be read with another decision of their Lordships (Patiabhiramier \ . Vencatarow,! B. L. R.,p. 136), in which it was held that in the absence of any express legislative enactment, the interest of the mortgagee becomes absolute according to the terms of the contract by the mere failure of the mort- gagor to redeem. We are therefore bound to suppose that in the earlier case of Mohun Lall Sukul, the Privy Council considered that the words " legal repre- sentative" were sufficiently wide to embrace an attach- ment creditor who, as we shall hereafter see, acquires a >ort of statutory hypothecation by virtue of the attachment. It follows that a puisne mortgagee, whether by way of simple mortgage or conditional sale, is entitled to notice under the provisions of the illation. (Nuddlar Chand Chuckerbutty v. Roop 22 W. R., p. 475.) NOTICE OF FORECLOSURE. 163 The Regulation is silent as to the person on LECTURE whom the notice of foreclosure is to be served when the person entitled to redeem is an infant. When a guardian has been appointed by the Civil Court, or the estate has been taken charge of by the Court of Wards, there can be no difficulty whatever, ser- vice on the guardian being a perfectly good service. If, however, no guardian has been appointed, it would seem that service on the person who would have a preferable claim to the guardianship of the minor would be deemed a good service. (Debee Persaud v. Manu Klian, 2 AIL, 444. See also Rashmonee Debea v. Prankissen Doss, 4 Moo. Ind. App., 392.) The safest course, however, for the mortgagee would be to apply to the District Court for the appointment of a guardian, who might be served with the notice of foreclosure. Where there are more mortgagors or legal representatives of such mortgagors than one, the notice ought to be served on each of them. A more difficult question arises when the mortgage is exe- cuted by one of several co-sharers, a practice not uncommon in this country, but under circumstances under which if the transaction had been an out-and- out sale, it would be binding upon all the coparcen- ers. Thus, for instance, A, the managing member of a joint Hindu family, executes a mortgage of an estate belonging to the joint family, the other mem- bers assenting to the transaction, either according to FORECLOSURE. LECTURE the usual practice by subscribing their names as y attesting witnesses, or otherwise ratifying the tran- saction. There is little doubt that in such cases if the mortgagee is not aware of the rights of the other members, it would be sufficient if the notice is served on the person by whom the mortgage was exe- cuted. The difficulty arises only where the mort- re is aware of the fact that the mortgagor is not the sole owner. It would seem, although the autho- rities are not very clear or consistent on the point, that even in such cases there may be a valid fore- closure on the foundation of a notice served only on the person who is the mortgagor on the face of the instrument by which the charge is created. (S. D. A., 1849, p. 36; S.D. A., 1856, p. 923 ; S.D. A., 1852, p. 423.) I may mention that persons deriving title subse- quently to the application of the mortgagee to fore- close are not entitled to any notice. If it were otherwise, proceedings in a foreclosure suit would be endless, as a fresh alienation might be made every day in the course of the proceedings. (The Bishop of n'indiesterv. Paine, 11 Vesey, 194; see also Bha- nooinnttij ChnwJrnin v. Prcni Clutml Neogee, 15 B. I,. 11., 28.) The rule, however, as I have already c-xplainc-d, does not apply to a purchaser under an ration. wh(i' jMirdia.se, although subsequent in date to the application for foreclosure, was made under an attachment executed before any application to foreclose by the mortgagee. (Anundmoyee Dassea FORECLOSURE. 1 65 v. Dhunindro Chundtr Mookerjee, 16 W. R., P. C., LECTURE 19; S. C., 14 Moo. Ind. App., 111.) In such cases, - liowever, it would seem that notice to the execution creditor would be sufficient. As to the nature of the service, it must, where practicable, be personal, and substituted service will not be good except where the mortgagor is shown to be keeping out of the way. In the case of Syud Esaf Ali Khan v. Mussamut Azumtoonessa (W. R., 1864, p. 49), Mr. Justice Norman, in delivering the judgment of the Court, said, " We may observe that, by the section now under consideration, the notification is not merely a preliminary proceeding leading up to a judgment of foreclosure to be subsequently pronounced in Court. It not only fixes the date from which the period during which the mort- gagor is to retain the right to redeem is to be computed, but it is of itself the operative act in the foreclosure proceeding. We think, therefore, that the service of the notice must be evinced by the clearest proof, and must in all cases be, if not personal, at least such as to leave no doubt on the mind of the Court, that the notice itself must have reached the hands, or come to the knowledge of, the mortgagor." You will observe that the Regulation directs that a copy of the application should be furnished to the mortgagor or his legal representative. This provision is mandatory and not merely directory, 16(5 DISTINCTION BETWEEN MANDATORY LECTUKK and an omission in this respect will, it seems, vitiate the whole proceedings. In the case of Santi Ram Jana v. Modoo Mytee (20 W. R., 363), where the mortgagor had not been served with a copy of the application, the Court observed, " It is urged, first, that the notice contained all the information which would be contained in the written application; and, secondly, that it was not the fault of the mortgagee, but of the Court peon, that the mortgagor was not furnished with a copy of the written application. But these are not considerations upon which we are at liberty to enter. The law prescribes two conditions which are to be fulfilled before a mort- gage can be foreclosed, and we cannot say that the mortgagee before us, who has only fulfilled one of them, is in a position to foreclose." (See also Denonatk Gangooly v. Nursing Per shad Dass, 22 W. R., 90.) The Allahabad Court has carried the principle of a close adherence to the provisions of the Regula- tion somewhat further, holding that a notice of fore- closure bearing the seal of the Court issuing it, but K (1 only by the Munsirim, and not by the Judge, U not a sufficient compliance with the law, and can- not be the foundation of a decree for foreclosure. '// llnrlall v. Manick Pal, 3 AIL, 176.) In in- that this is carrying the doctrine further than the Calcutta High Court has done, I do not mean to suggest that the decision is not perfectly AND DIRECTORY ENACTMENTS. 167 good law, although it may possibly work hardship LECTURE in particular cases. At any rate it is better to - adhere closely to the plain directions of a statute than to fritter it away by calling in the distinction between mandatory and directory enactments, a distinction which, unless carefully fenced in, would introduce the greatest uncertainty into the law. An examination of the general question to which the discussion has conducted us would be beyond the range of these lectures. Those of you who wish to know more on the subject may consult the following English cases. (Morgan v. Parry, 17 C. B., 334 ; Henderson v. The Royal British Bank, 7 E. and B., 356; compare Bowman v. Blyth, 7 E. and B., 26; and Friend v. Dennett, 4. C. B., N. S., 576.) I may here mention that the notification to the mortgagor ousrht to tell him distinctly that if he do O O O suc. in so far as the right of redemption is concerned, will be whether any thing at the end of DECREE FOR FORECLOSURE. 169 the year of grace remained due to the mortgagee, LECTURE and if so, whether the necessary deposit had been then made. If that is found against the mortgagor, the right of redemption is gone." (Per Lord Kings- down, delivering the judgment of the Judicial Com- mittee in Forbes v. Amerunnessa.} Although in one sense it may, therefore, be said that the title of the mortgagee is not complete till he obtains a decree in a regular suit, it must not be understood that the decree creates any title in favor of the mortgagee. It only establishes, beyond all question, that as between the mortgagor and mort- gagee, the ownership has passed absolutely from the former to the latter. The title of the mort- gagee in reality dates from the end of the year within which the mortgagor is permitted to redeem, and it is for this reason that the mortgagee may maintain an action for mesne profits against the mortgagor for the period between the expiration of the year of grace and the actual recovery of the land. (Jeora Kliun Singh v. Hookum Singly 5 Agra, 358. See also Suroop Cliunder Roy v. Mo/tender Chunder Roy, 22 W. R., 539.) I have been at some pains to explain the real character of the proceedings under Regulation XVII of 1806, and the relation they bear to the regular suit which the Circular Order enjoins, because I find there is some misconception on the point, arising probably from the observation made by 22 170 RIGHT OF MORTGAGEE LECTURE the Privy Council in the case of Forbes v. Amerun- - nessa that the " title of the mortgagee is not even then (when the mortgagee has failed to redeem within the year of grace) complete." The context shows that all that was meant by these words was that the title of the mortgagee might be impeached by the mortgagor in a regular suit notwithstanding the regularity of the proceedings under the Regula- tion; in other words, that the mortgagee's title was not so secure as under a decree for foreclosure. Before quitting the subject of foreclosure, I wish to call your attention to the precise nature of the restrictions imposed by the Regulation upon the strict rights given by the contract to the mortgagee. It has only extended the period of redemption to . any time within one year from the date of the noti- fication to the debtor that the creditor is desirous of enforcing the repayment of the debt, but any other covenants which may be contained in the deed are left wholly untouched. If, therefore, there is a covenant that the mortgagee shall enter upon possession on default, he will not be restrained from taking possession, although he should attempt to do so before foreclosing the debtor's equity of redemp- tion. 1 Ie can, however, only take the rents and profits as mortgagee, liable to account to the niort- or. The question whether a mortgagee in this country has :i ri-ht to bring ejectment immediately default, was discussed in the case of Denoitath TO ENTER ON DEFAULT. 171 Gangooly v. Nursing- Pershad Dass (22 W. R., 90), LECTURE which deserves very careful study. It is true that in that case, as well as in the Privy Council cases which are cited in the judgment of Mr. Justice Markby, the right to possession on default was expressly stipulated for, and it may therefore be said that none of these cases is an authority for the proposition that a right of entry would accrue on default where the instrument is wholly silent as to any such right, and only provides for a transfer of the right of ownership. I, however, venture to think that a right of entry may fairly be presumed from the express agreement of the debtor that the ownership shall pass, although the relation of mortgagee and mortgagor is so anomalous that any deduction from general principles must be made with caution. (See the observations of Mr. Justice Markby in Denonath Gangooly v. Nursingh Pershad Dass, 22 W. H., 90.) Any other construction, however, would lead to absurd consequences, as I shall have occa- sion to point out to you when I discuss the question of limitation, and it seems to me that the only way out of the difficulty is to presume that in every mortgage there is an implied right of entry given to the mortgagor as necessarily accompanying the right of ownership, the implied right not being controlled by any law, and having the same opera- tion as an express stipulation, and for the same reasons. There is, however, another class of cases in l~'2 DECREE FOR SALE. LECTURE which the mortgagor stipulates that on default the mortgagee shall have authority to foreclose and to take possession after foreclosure as absolute owner. In instruments of this class, and they are by no means uncommon, I think there is no room for presuming any right of entry on default, and I am afraid the anomaly to which I have alluded in connection with the statute of limitations cannot be avoided. I shall now ask you to compare the law of foreclo- sure in Bengal with that which obtains in the other provinces, and which is based on the practice of the English Court of Chancery. The mortgagee wishing to foreclose brings a suit praying that an account may be taken of the principal and interest due on the security, and that the defendant may be directed to pay the same by a day to be appointed by the Court, or be foreclosed his equity of redemption. An account is then taken, and a decree is made for payment within a certain time, generally six months, the mortgage being foreclosed in the event of default, when the mortgagee may obtain an abso- lute order for foreclosing. I have not been able to discover any reported < in which a sale has been ordered instead of a foreclosure. In a recent case the High Court made a decree for foreclosure, although ilio District Court had made a decree for sale. \Vr have ieet] that Knglish Courts of equity have been armed by u recent statute with exten- ELECTION BY MORTGAGEE. 173 sive powers of directing a, sale instead of a fore- LECTURE closure, and it is to be hoped that the Indian Courts will follow the same practice. I may mention that a decree for foreclosure is not binding upon one not a party to the decree. It is therefore necessary that all persons entitled to redeem should be represented in the suit. Who those persons are I shall discuss more fully in the next lecture. The question whether a mortgagee is entitled to pursue all his remedies concurrently does not seem to have been directly raised. In England, where the mortgagee suspects his security to be deficient, the proper course for him would seem to be to proceed against the mortgagor on the collateral securities in the first instance, and then apply for foreclosure for the deficiency. It is true that the mortgagee is at liberty to foreclose and then to pro- ceed asrainst the inortgas-or on his collateral securi- O O Cj ties, but this has the effect of opening the decree of foreclosure, and is therefore attended with incon- venience. It is difficult to say how the Indian Courts will deal with such cases. In Bengal it would seem that the mortgagee, if he elect to fore- close, will not be suffered to proceed personally against the mortgagor even when there is a cove- nant for the repayment of the debt. There is no provision in the Regulations for re-opening a decree of foreclosure, and this of itself would be a ground for putting the mortgagee to his election. The 174 STATUTE OF LIMITATIONS. I:RE same difficulty does not occur where the mortgagee y applies for foreclosure for the deficiency after hav- ing proceeded against the debtor personally. As in Bengal, the mortgagee is entitled to enter upon possession on default subject to his own right to foreclose and the right of the mortgagor to redeem. There being no distinction between Courts of Equity and Courts of Common Law in this country, the law will not permit ejectment where the mortgagor would have a right to relief in equity. In the case of Sitaram Dandekar v. Ganesh Gokhle (6 Bom., 121), where the mortgage deed contained a clause to the effect that the mortgagee should be entitled to possession on default by the mortgagor in payment of the interest on the principal money secured by the mortgage, the Court refused to make an absolute decree for ejectment, and directed the mortgagor to pay to the mortgagee the arrears of interest due to him within three months, or that in default the property should be delivered to the mortgagee to be held by him under the terms of the inortu-:ii;v bond. I will conclude by discussing the question of the time within which the mortgagee is permitted to rt his rights under the statute of limitations. I shall, in the iirst place, discuss the question with i -He re nee to Act XIV of 1859, and then with refer- ence to Act IX of 1871, the present Statute of Limitations. Now, in order to clear up the matter PERMISSIVE OCCUPATION. 175 as mucli as possible, I shall first take up tlie case in LECTURE which the mortgagor himself continues in posses- sion and is the party defending the suit. It would be tedious to go through the various conflicting decisions on the point before the law was finally settled in the case of Denonath Gangooly v. Nur- singh Pershad Dass, in which all the earlier autho- rities are reviewed, and a clear and consistent doc- trine is laid down. (22 W. K., 90.) Now the provision of Act XIV of 1859, which is applicable to mortgages, is that laid down in clause 12 of the first section of the Act, which says, " To suits for the recovery of immoveable property, or of any interest in immoveable property, to which no other provision of this Act applies the period of twelve years from the time the cause of action arose." The words "cause of action" are nowhere defined in the Act, but as pointed out by Mr. Justice Markby in Denonath Gangooly's case, which is the leading case on the subject, it is clear that two things are necessary to constitute a cause of action ; a right to possession, and an adverse withholding of that right. " If the plaintiff had not a right to immediate possession, or if having a right to posses- sion the defendants were holding with the plaintiff's permission, and acknowledging his right, no suit could be brought in the one case, because the right to possession had not accrued; and in the other, because 176 DISTINCTION BETWEEN PEUMISS1VE LKCTUBE it had not been disturbed or denied." (Per Markby, '- J., in delivering judgment in Denonatk Gangooly v. Nursingh Pershad Dass.} Now we have already seen that, generally speaking, a right of entry accrues immediately to the mortgagee on default, but still no cause of action would arise if the mortgagor continued in occupation acknowledging the title of the mortgagee, and, as is commonly the case, paying the interest on the principal sum regularly to the mortgagee, who from various causes might be reluc- tant to assume possession of the pledge. In such a case as this it would be monstrous to contend, that by allowing the mortgagor to retain possession for a period of twelve years, the mortgagee loses his right to the security. " It would be confounding adverse occupations with those which have not the semblance even of such a character, and would establish a bar arising from simple occupation and not from the laches of the demandant or others before him." (Per Lord Kingsdown, 6 Moo. Ind. App., 353.) A difficulty, however, may arise in those cases in which the mortgagor neither pays any interest nor docs anything else to indicate that he acknowledges the right of the mortgagee. In such cases it may, I think, be fairly presumed, in the absence of any evidence to the contrary, that the possession of the mort-'a -iily permissive, and cannot, therefore, bo urged as a bar to an action by the mortgagee. AND ADVERSE OCCUPATION. 177 If, however, the mortgagor retained possession LECTUEE under such circumstances as would rebut the pre- sumption of a permissive occupation, the mortgagee's suit must fail. " A default may be made by the mortgagors, which may give the mortgagee a right to sue or to enter into possession (if he chooses to assert such right), but which may, notwithstanding, have no effect whatsoever in altering the nature of the mortgage title. So long as the mortgagor in possession, or those who claim under him, assert merely a title to redeem, and advance no other title inconsistent with it, such possession must primd facie at least be treated as perfectly reconcileable with, and not adverse to, the title of the mortgagee, and the con- tinuation of the lien on the property pledged." (Bul- deen v. Golab Koonwar, Agra, Full Bench, 108.) It was thought at one time that no cause of action could accrue to the mortgagee before foreclosure, and as there is no limit as to the time within which an application for foreclosure may be made, the curious result followed that a mortgagee might, if he chose to do so, enforce his security at any time, and no safe title could possibly be acquired against a mortgagee in this country. The doctrine rested on the supposition, which I have shown to be erroneous, that no right of entry accrued to the mortgagee till foreclosure. I have, however, already referred you to a class of securities which may possibly admit of different considerations. 23 }78 PURCHASER FROM MORTGAGOR. LECTUKK I sliall next consider the case in which the rights y of the mortgagor have been transferred to a third person. Now if such third person purchased with notice of the mortgage, the same presumption would l>e made as to the character of his possession as if the mortgagor himself had been in occupation. But if the purchase was made without any such notice, there can be no pretence whatever for treating the possession of the purchaser as permissive, or as that of a person holding in privity of the. mortgagor. In the case of Anund Moye Dassee v. Dhunindro Chunder Mookerjee (14 Moo. Ind. App., Ill), the Privy Council observed: "Their Lordships think that the title of a judgment-creditor, or a purchaser under a judgment decree, cannot be put on the same footing as the title of a mortgagor or of a person claiming under a voluntary alienation from the mort- gagor. The3 T are of opinion that the possession of a purchaser under such circumstances is really not the possession of a person holding in privity of the mort- gagor, or holding so as to be an acknowledgment of the continuance of the title of the morts:ao:ee. o o The possession which the purchaser supposed he iKMjuired was a possession as owner. He thought he was acquiring the absolute title to the property, and that he was in possession as absolute owner." I have not considered the case of a trespasser holding adversely both to mortgagor and mort- gagee. If the trespasser enter into possession after STATUTE OF LIMITATIONS. 179 default, there can be no difficulty whatever, as that LECTURE would be a much stronger case than that of a pur- chaser without notice of the mortgage. The diffi- culty arises only when the occupation commences before default, and the mortgagor takes no steps for the purpose of vindicating his rights. There does not seem to be any method in this country by which the mortgagee may interrupt the prescription, and it would seem to be a hardship upon him to hold that the time would run against him before he had acquired a right of entry. The authorities are not very clear on the point. In a case reported in the Weekly Reporter for 1864, Mr. Justice Jackson observed : " The question to be decided is, when did plaintiffs' cause of action arise ? They have alleged that the date of expiry of their year of grace is the date from which the cause of action should be calculated. This may be the rule in those cases where the mortgagor remains in peace- able and undisturbed possession of the estate mort- gaged. But the rule no longer stands good when the mortgagor is dispossessed, and his title disputed, and another person obtains possession of the estate. The possession of this new holder becomes a posses- sion adverse to both the plaintiff's mortgagor and to the plaintiff, the mortgagee. If the mortgagee submits to this possession for more than twelve years, he loses his right to contest the title of the new holder. His cause of action against the new 180 COURTS ESTABLISHED BY ROYAL CHARTER. L-UE holder arose on the date on which the latter obtained v such adverse possession of the mortgaged estate. Circumstances may occur which will defer the mort- gagee's cause of action. If the mortgagor, for instance, contests the title of the new holder, and a litigation ensues between them, the mortgagee is not bound to take action upon his mortgage until that litigation is decided. But if the mortgagor's title is rejected, and his possession is disturbed by an adverse one, the mortgagee's cause of action against the new holder commences from the date on which the latter obtains possession on his title adverse to the mortgagor, which has been con- firmed by the Courts. This is the law on the subject which has been laid down in the Privy Council." (Prannath Roy CJiOwdhry v. Rookeea Begum, W. R., 1864, p. 375.) I may mention that section 6 of Act XIV of 1859 contained a special enactment with regard to suits on mortgages in Courts established by Royal charter. "In suits in the Courts established by Royal charter by a mortgagee to recover from the mortgagor the possession of the iniuioveable property mortgaged, the cause of action shall be deemed to have arisen from the latest date at which any portion of principal money or interest was paid on account of such mortgage debt." It might perhaps be plausibly argued upon the language of this section, that in cases to which it STATUTE OF LIMITATIONS. 181 did not apply, the mortgagee's right of action would LECTUBE not be kept alive by the payment of any portion - of the principal money or interest. This, however, does not necessarily follow. The object of the legislature was probably to put mortgages in the English form, when sued upon in the Supreme Court, on the same footing as English mortgages. If this be a correct view, it would seem that, under Act XI Y of 1859, English mortgages were placed in a less favorable position as regarded limitation than Mofussil mortgages, for, in the latter case, as we have already seen, the cause of action did not neces- sarily arise with the last payment of any portion of the principal or interest. The new Act (IX of 1871) contains a distinct provision for suits for possession of immove- able property by mortgagees. The period allow- ed under the new law is the same as that under the old statute, but it runs not from the accrual of the cause of action, but from the time when the mortgagee first becomes entitled to possession. It may, therefore, be presumed that the old doctrine of adverse and permissive occupa- tion has been abolished, and the mortgagee must sue for possession within twelve years of the date fixed for the repayment of the loan. In a recent case the Court observed : " The question raised in the earlier cases as to the accruing of the cause of action does not arise here, the legislature having iu 182 PERMISSIVE OCCUPATION. LECTURE Article 135, Act IX of 1871, substituted for that y occurrence a specific time, viz., the time when the mortgagee was first entitled to possession. This was confessedly the 29th Cheyt 1260. "la this view of the case, the nature of the defendant's possession, whether adverse or permis- sive, is immaterial. The mortgagee having his time expressly limited by the Act was bound to guard himself, and if he did not do so, and allowed the time to pass, he loses his remedy." (Lall Mohun Gungopadliya v, Prosonno Cliunder Banerjee, 24 W. R., 433.) I may, however, venture to suggest that the clause was not perhaps intended to apply to a case in which the mortgagor is permitted to retain posses- sion so long as he pays interest. In such cases, I presume, a new cause of action, or right of entry, would accrue on the determination of the permission. Tims, suppose a landlord makes a lease for a term of years ; according to the provisions of the new Act, the landlord would be bound to bring ejectment within twelve years of the determination of the truancy. But suppose the tenant holds over with the consent of the landlord, who receives rent from the tenant, it would he absurd to contend that the landlord would be barred if he allowed the tenant ! retain possession, for a period of twelve years. au.Mver to such a contention would be, that there was a fresh contract between the parties, and STATUTE OF LIMITATIONS. 183 I conceive that the same answer would be given to LECTURE a defence by the mortgagor founded on clause 135, the mortgagor having been all the while in posses- sion with the assent of the mortgagee, who con- tinued to receive the interest regularly. The word "first" may possibly create some difficulty, but it was probably introduced for the purpose of indi- cating clearly that it was not intended that the period should run from the end of the year of grace. (For Courts established by Royal Charter, see art. 149 of the Act.) LECTURE VI. Equity of redemption Origin of expression Position of mortgagor before foreclosure Right to redeem Bengal Regulation XVII of 1806 Recognized by Courts of Justices in other Provinces Opinion of the Privy Council Puttai'r>'uit for redemption of a portion of the mort- gaged property, on the allegation that the whole of the debt secured by the mortgage has been islk-d. These cases, however, are no exception to the rule that a mortgage debt is indivisible, for, in the cases to which I refer, there is no longer any REDEMPTION OF PART. 195 debt due to the mortgagee. (Hurdeo v. Guneshee LECTURE Lall, 1 Agra, 3 ; see also 1 Agra, 36 ; 4 Agra, 33.) It would not, however, be always safe to bring such an action, and the co-mortgagors should, if possible, be placed on the record as defendants if they refuse tojoin in the action ; and, although the plaintiff might sue for his own share, the suit ought to be brought in the Court which would have jurisdiction over the whole of the subject-matter. (Unnoda Persaud Roy v. Erskine $ Co., 21 W. R., 68.) If a different rule were laid down, the* mortgagee might be harassed by twenty different suits, and although the language used by the Court in some reported cases is not free from ambiguity, I venture to think that it was never intended to lay down the broad proposition that one of several mortgagors could sue without making his co-mortgagors party defendants. Cases in which the interests of the mortgagors appear to be distinct and separate on the face of instrument are sometimes supposed to form an exception to the rule that a mortgage security is indivisible. There is, however, no foundation for the notion except some carelessly reported dicta in Mulik Basab v. Dhana Bebee (5 N. W. P., 220). It is true an instrument may be so worded that each of the mortgagors may redeem his share on payment of a rateable portion of the mortgage debt, but such a clause is seldom, if ever, found in a 106 REDEMPTION OF PART LECTITBE mortgage deed, and cannot safely be inferred merely from a recital of the different shares of the mortgagors in the document. To the general rule, however, that a mortgage must be redeemed entirely or not at all, there is one exception, and that is where the equity -of redemption in a portion of the mortgaged property becomes vested in the mortgagee himself. In such cases the mortgage security is broken up. and the mortgagor or his representatives become entitled to redeem on payment of a proportionate part of the debt charged on the property. Thus, where two villages were mortgaged by the same instru- ment as security for one sum, and they were both subsequently sold under an execution against the mortgagor, and one of them was purchased by the mortgagee himself, and the other by a third person, the execution-purchaser was allowed to redeem on paying a proportionate part of the mort- gage debt. As pointed out by Morgan, C.J., in giving the judgment of the Court in Mahtab Singh v. Misree Lall, "A mortgagee is entitled to say to each of several persons who may have succeeded to the mortgagor's interest, that he shall not be entitled to redeem a part of the property on payment of part of the debt, because the whole and every part of the land mortgaged is liable for the whole debt. But it does not follow from this, that a mortgagee, who has acquired by purchase ALLOWED IN EXCEPTIONAL CASES. 197 a part of the mortgagor's rights and interests, LECTURE is entitled to throw the whole burden of the mort- - gage debt on the remaining portion of the equity of redemption in the hands of one who has pur- chased it at a sale in execution of a decree against the mortgagor. Each has bought subject to a proportionate share of the burden, and must dis- charge it." (2 Agra, 88 ; see also Nathu Sahu v. Lalla Ameer Chund, 24 W. R., 24.) These cases, however, must be carefully distin- guished from another class of cases with which they may be easily confounded. The principle laid down in Mahtab Singh v. Misree Loll (2 Agra, 88) will not apply to a case in which the equity of redemption of a portion of the mortgaged property becomes vested in one or more of several mortgagees, and the reason of this distinction is obvious. Where the whole estate as to one portion of the pledged property becomes vested in the mortgagee, or in all the mortgagees, if there are more than one, the mortgagor, if compelled to redeem on condition of paying the whole debt, would have an action for contribution for the excess payment, and thus two suits would be necessary in the place of one for the purpose of attaining the same end. This reason, however, which is founded only upon convenience, does not hold good where the purchaser happens to be one of several mort- gagees. In such a case the other mortgagees J98 RIGHTS OF MORTGAGEE. LECTURE could not be sued for contribution, and they might VI 1 very reasonably complain if by the acts of one of them the indivisible nature of the security was altered. Where, therefore, one of several mortga- gees purchases a part of the property mortgaged, the case is governed by the general rule, and the pur- chaser of another part has no right to redeem except on payment of the whole of the mortgage debt. (Sobha Sah v. Inderjeet, 5 AIL, 149.) We have seen that when the mortgagee, or if there are more than one, all of them jointly pur- chase the equity of redemption of a part of the mortgaged propert}', they cannot insist upon the pay- ment of the whole of the debt secured by the mortgage as a condition of the redemption of the rest of the mortgaged property. Questions, however, of consi- derable difficulty sometimes arise when the equity of redemption of a portion becoming vested in the mortgagee, that of the rest passes to two or more different persons. In the case of Nowab Ahmed AH Khan v. Jowhir Sing, the estate having been sold subject to mortgage to different persons, one of them being the mortgagee himself, a purchase? of a por- tion of the mortgaged property sought to redeem his share on payment of a rateable part of the mortgage debt. The purchasers of the other portions were not parties to the suit, and the mortgagee Hoisting that the plaintiff could not succeed without ;iu offer to redeem the portion which had passed to AND PURCHASER OF EQUITY OF REDEMPTION. 199 the other purchasers, the Court refused to make any LECTURE decree for redemption, being of opinion that the mortgagee had a right to insist upon the redemption of the whole of the property, with the exception of that purchased by himself, on payment of a propor- tionate part of the mortgage debt. (N. W. P., 1864, 425.) You will observe that all that the Court ruled in the above case was, that the plaintiff was bound to offer to redeem the whole of the estate with the exception of that purchased by the defendant, and not that he was entitled to do so if the mortgagee should refuse to part with the shares of the other persons. The distinction is important, and is well illustrated by the judgment of the Privy Council in the subsequent suit for redemption between the same parties, in which the plaintiff claimed to redeem the whole of the mortgaged property with the exception of that which had passed to the mortgagee. The defendant, while conceding to the plaintiff the right to redeem the portion which had been purchased by him, resisted his right to redeem the rest. The Court below being of opinion that the mortgagee could not be permitted to turn round after having " forced the plaintiff to bring the second suit," made a decree for redemption in the terms of the prayer in the plaint. (Nawab Ahmed Ali Khan v. Jowhir Sing, 1 Agra, 3.) From this decree there was an appeal to the Privy Council 200 RIGHTS OF MORTGAGEE LECTURE when the mortgagee again insisted upon his right to - retain possession of that portion of the estate which had not been purchased by the plaintiff. Their Lord- ships observed: "The remaining question is what, upon the facts found by the Courts below, ought to have been their decree. The appellant now complains that the plaintiffs have been allowed to redeem as against him the villages other than their own village o o o of Hosseinpore, i.e., to put themselves in his shoes as mortgagee in respect of these .villages ; and further, that the decrees were wrong in refusing to treat him as the owner under a subsequent purchase of three- fourths of Rookumpore. " The first objection does not come with a good grace from the appellant, who defeated the plaintiffs' former suit, on the ground that they had not offered to redeem the villages in question, and who, in this very suit, lias included in his calculation of the amount, which, as he alleges, ought to have been brought into Court, the shares of the mortgage debt which he said were chargeable on those villages. The Courts below, however, seem to their Lordships to have mistaken the effect of the former decision of the Sudder Court. It merely ruled that the plaintiffs were bound to offer to redeem the villages in ques- tion ; it did not rule that they were entitled to do so, or to acquire the interest of the mortgagee in them his will. It is unnecessary to determine in this suit whftlicr, in the peculiar circumstances AND PURCHASER OF EQUITY OF REDEMPTION. 201 of this case, the former proposition is correct. LECTURE Their Lordships are of opinion that the latter cannot be supported. They think that the appellant, if desirous of retaining possession of these villages as mortgagee, is entitled to do so against the plaintiffs, whose right in that case is limited to the redemption and recovery of their village of Hosseinpore upon payment of so much of the sum deposited in Court as represents the portion of the mortgage debt chargeable on that village," (13 Moo. Ind. App. r 404 ;S. C., 14 W. R.,P. C., 20.) You will observe that the Judicial Committee refused to express any opinion as to the correctness or otherwise of the proposition laid down by the S udder Dewany Adalut in the previous suit. The latter ruling, however, has since been followed by our Courts, and it certainly does not seem to be open to any serious objection. (4 All., 92.) A mort- gagee, by purchasing a portion of the mortgaged property, does no doubt destroy the indivisible character of his security to a certain extent; but it would be going too far to hold that the indivisibility of the debt was absolutely destroyed, so that any one of the other persons interested in the equity of redemption might be let in to redeem on payment of the proportion of the debt attributable to the por- tion in which he might be interested. To take a simple case, suppose two brothers execute a mort- gage of their property. If one of the brothers 26 202 REDEMPTION BY MORTGAGOR. LECTURE should die leaving three sons, and the other brother VI 1. should sell his share in the mortgaged property to the mortgagee, I do not think any one of these sons could redeem his share without offering to redeem the shares of the other representatives of the deceased mortgagor. The foregoing observations are applicable to all kinds of securities. In cases of conditional sales governed by the Bengal Regulations, it may, how- ever, be doubted how far these general principles can be given effect to, the language of the Regulations being curt and applicable only to the more common cases. In the absence of any direct authority, I do not wish to hazard any opinion on the point. I shall now proceed to consider the method by which redemption may be accomplished, and I pro- pose, in the first instance, to state the law as it is administered in this Presidency. Now the mort- gagor may either assert his right of redemption actively, or he may be proceeded against by the mort- gagee seeking to foreclose, when the mortgagor may prevent a foreclosure by the repayment of the debt within a limited time. For reasons which are ob- vious, except when the mortgagee is in possession, a mortgagor seldom, if ever, takes any steps to redeem the mortgage till the mortgagee applies for foreclo- sure. Section 7 of Regulation XVII of 1806, however, applies as well to cases in which the mortgagee is in possession as to those in which the mortgagor REGULATION XVII OF 1806. 203 has never parted with the possession of the pledge. LECTURE That section provides, that " when the mortgagee may have obtained possession of the laud on execu- tion of the mortgage deed, or at any time before a final foreclosure of the mortgage, the payment or established tender of the sum lent under any such deed of mortgage and conditional sale, or of the balance due, if any part of the principal amount shall have been discharged, or, when the mort- gagee may not have been put in possession of the mortgaged property, the payment or established tender of the principal sum lent with any interest due thereupon, shall entitle the mortgagor and ovvner of such property 'or his legal representative of the redemption of his property." Instead, however, of paying or tendering the money to the mortgagee, the debtor may deposit the money in the Dewauy Adalut of the zillah in which the property is situated. In the last lecture I had occasion to refer in some detail to the provisions of the 8th section of Regu- lation XVII of 1806, which relates to foreclosure. That very section points out the method by which a foreclosure may be prevented, and the redemption of the mortgage accomplished, by the mortgagor. When an application for foreclosure is made, the mortgagor is bound to pay to the mortgagee, or to deposit in theDewany Adawlut the principal, or the balance, if any part of the principal shall have been 204 CONDITIONAL DEPOSIT. LECTTBE paid, together with interest, if possession has not been taken by the mortgagor. Now the tender or deposit, in order to be good, must be unconditional. It must not be made in such a way as that its acceptance will impose a condition upon the creditor, or supply evidence of an admission that no more is due than the amount tendered or deposited ; and I need hardly add, that, as it is the very essence of a tender that the person to whom it is made should be at liberty to take the money at once, a deposit under the Regulation, which takes the place of a tender, must necessarily be bad if accompanied by a protest that the money should not be paid away to the mortgagee immediately. ( Goluckmonee Debea v. Nobongomonjoree Debea, Suth. F. B., 14. See also S. D. A., 1847, p. 462; S. D. A., 1848, p. 897; S. D. A., 1859, p. 852.) A somewhat different question arises when the deposit, instead of being clogged with any condition, is merely accompanied by a protest that the money is not due, and that the mortgage deed is invalid. The question actually arose in the case of Prannath Cliowdhry v. Rookea Begum, which was heard in the last resort by the Privy Council, when their Lord- ships held that such a deposit is bad. In delivering the judgment of the Board, Lord Kingsdown said : * The remaining objection relates to the payment into Court, in the nature of a tender, which was made by the defendant liamruttun Roy. Ramruttim Roy DEPOSIT UNDER PROTEST. 205 directed the money to be paid out to the appellant, LECTURE but at the same time, in his petition to the Court, he disputed the validity of the appellant's title to foreclosure, and expressed an intention, amounting to a notice, to sue the appellant to recover back the very money which he was tendering. " The meaning of the direction that the money may be paid into Court clearly is, that the mortgagor may have adequate and lasting evidence of that which is put in place of a tender, and the mortgagee the security and advantage of a deposit in acknowledgment of the title. The mortgagee would have little inducement to take the money, waiving his lien by its acceptance, if litigation on the very same subject were to recommence upon the acceptance of the money; and though mere words, in the form of a protest, which may accom- pany a tender, will not defeat, where they can reason- ably be regarded as idle words, their Lordships think that the proceedings of Ramruttun Roy with respect to the mortgagee's title to foreclosure forbid such an interpretation of his language and his act." (7 Moo. Ind. App., 323. See also Abdar Ruhman v. Kisto Lall Ghose, 6 W. R., 225.) I may mention that this decision has been criticised a good deal. But although at first sight it may seem to treat a tender with a threat that the money is not due as a conditional tender, the judg- ment really proceeds upon the ground that the 206 YEAR OF GRACE LECTURE Indian Regulations contemplate cases in which the VI '- relation of mortgagor and mortgagee is undisputed, and that section 7 of Regulation XVII of 1806 was not intended to apply to a case in which an alleged mortgagor makes, under protest, a tender of money upon a mortgage, the validity of which he refuses to acknowledge. We now come to the time within which the money must be tendered or deposited. Now, the Regulation, as you will observe, allows one year from the date of the ' notification.' It is now, however, settled, so far at least as the Calcutta High Court is concerned, that the statutory period runs only from the date of the service, and not of the mere issue of the notice. This was decided in the case of Mohesh CJiunder Sein v. Mussamut Tarinee (10 W. R., 27, F. B.) The Court, however, refused to say from what point of time the period should run when the mortgagor cannot be served. There can, however, be little doubt, that where substituted service is permitted, the period would run from the date of such substituted service. I may mention that, in calculating the year of grace, the date on which the service is effected is excluded. (Mohesh Chunder Sein v. Tarinee, 10 W. R., F. B., 27; S. C., 1 B. L. R., F. B., 14.) It would appear that, in the Allahabad Court, the year is still reckoned from the date of the issue of the notice. \. tihouk/iu/t Dliobce, 3 All., 301.) HOW RECKONED. 207 We have seen that the mort:a2;or is at liberty LECTURE VI. either to tender the monev to the borrower, or to if deposit it in Court within the statutory period of one year. If, however, the Court be closed on the day on which the year of grace expires, a deposit cannot be properly made on the first day on which the Court reopens. In order to save the equity of redemption it must be made strictly within the year allowed by the Regulation, and the rule would seem to be the same as well when the Court is closed accidentally and unexpectedly, as when it is closed during an authorized vacation. In the case of mortgages the law allows the mortgagor an alternative, and if he prefer, for his own security, to deposit the money in the Zillah Court, he must avail himself of the privilege at a time when it is within his reach. As observed by the Court in a recent case : " If we were to hold otherwise, we should be allowing the mortgagor to extend the year of grace at pleasure. He might say, l If I pay the money to the mortgagor, I must do it within one year; but if I pay it into Court, I shall have thirteen or fourteen months.' " (Komala Kant Mytee v. Jtfarainee Dossee, 9 W. R., 583.) The class of cases of which the above is an illustration must be carefully distinguished from those in which, by an agreement between the mortgagor and mortgagee, the time for payment is extended beyond the statutory period, and owing 208 FORFEITURE. LECTURE to the unexpected closing of the Court, the deposit '- cannot be made within the time fixed by the parties. This was decided in the case of Davi Rawoot v. Heeramon Mahatoon, in which the mortgagee having extended the time for repayment to the 25th of November 1863, on which day the Court was unexpectedly closed, the mortgagor deposited the money on the first day on which the Court reopened, and the question arose whether the deposit was made in time to save the equity of redemption. The Court held that the deposit was good, but in giving judgment the Chief Justice, Sir Barnes Peacock, made certain observations which were certainly not necessary to the decision of the case, and are perhaps open to criticism. The learned Chief Justice is reported to have said : " The day fixed for payment to prevent a foreclosure of the estate was not a day peremptorily fixed by the law, but a day fixed by the mortgagee himself. Now Courts of Equity, as a general rule, will relieve from forfeiture caused by not doing an act on a day fixed by the parties ; and I think they ought also to relieve when the day is fixed by law, and the act is prevented by some accident which the person to be affected by the forfeiture could not prevent, and which was not caused by any default or misconduct on his part. Courts of Equity will not allow a lessor to forfeit a lease, because the rent is not paid on a particular day." Now, although Courts of Equity COURTS OF EQUITY. 209 are always willing to relieve against forfeitures LECTURE caused by the non-performance of an act on the day fixed by the parties, I do not believe that there is any instance of the exercise of such power when the time is appointed by statute. Indeed, it is difficult to see how such a power could be exercised without trenching on the province of the Legislature, and any argument from analogy would be simply misleading. Take the Statute of Limitations for instance : I do not think it could be contended for a moment that if the plaintiff was prevented by some unforeseen accident, without any default on his part, from suing in time, that a Court of Justice would be justified in receiving his plaint. I should, therefore, venture to think that where the period for doing the act is fixed by law, the person who would be affected by the non-performance must per- form it within the statutory period at his peril. There is another observation of Sir Barnes Pea- cock which would also seem to be open to question. The learned Judge says, " I should hold that the plaintiff has the option, either of depositing the money in the Judge's Court, or of tendering it ; and that if there is a sufficient excuse for not depositing it in the Judge's Court, he is not bound to tender the money and prove that tender." (8 W. R., 223.) Now, although the mortgagor may not be bound to tender the money to the mortgagee, he should certain! v deposit it in Court at a time when 27 210 REDEMPTION. LECTURE it is within his reach to do so. The case may be a 1 very hard one when the Court is closed unexpectedly, but the mortgagor who defers paying till the last moment, perhaps does not deserve much pity. It very frequently happens that the mortgagee, during the currency of the year of grace, allows an extended period to the mortgagor to repay the debt. In such cases the mortgagor must take care to tender or deposit the money within the limited period, otherwise the mortgage would be foreclosed at the expiration of the time. ( Goonomonee Das- see v. Parbutty Dassee, 10 W. R., 326.) I have said that the mortgagor may, without waiting till the mortgagee attempts to foreclose, take steps for the purpose of redeeming the mort- gage, a right which may be exercised even before the stipulated period. Under the Regulations the mortgagor may, on deposit of the principal in cases in which the mortgagee has been in possession, call upon the Court to restore the possession of the pro- perty to him, subject, however, to an adjustment of accounts between the parties. (Section 2, Regula- tion I of 1798.) If, however, a less sum is deposited, the mortgagor cannot get back into possession except under a decree in a regular suit, in which any question of right between the parties may be regularly brought before, and determined by, the Courts of Civil Justice. In provinces to which the Bengal Regulations do STATUTE OF LIMITATIONS. 211 not apply, the mortgagor may, at any time before LECTUBE foreclosure and after default, bring a suit for redemption against the mortgagee, when the Court takes an account of the amount due on the mort- gage securitj 7 , and allows the mortgagor a certain period, usually six months, to pay the money. If, however, the mortgagor fail to pay the money within the appointed time, the equity of redemption is fore- closed precisely in the same manner as if the mortgagee had got a decree for foreclosure. This is the practice in the English Court of Chancery, and is followed in Bombay and Madras. In Bengal and the North- West the law on this point cannot be said to be quite settled. I shall, however, discuss the point at some length in the next lecture, in which I propose to treat of usufructuary mortgages. I now come to the time within which, under the Statute of Limitations, the right of redemption must be asserted. The provisions of the present law are substantially the same as those of Act XIV of 1859, and I shall, therefore, confine myself to the later statute. Now Article 148, Schedule 2, Act IX of 1871, provides a period of sixty years, commenc- ing from the date of the mortgage, unless where an acknowledgment of the title of the mortgagor or of his right of redemption has, before the expiration of the prescribed period, been made in writing signed by the mortgagee or some person claiming under him, and in such case from the date of the acknowledgment. STATUTE OF LIMITATIONS. LECTTTBK In the case, however, of a purchase for value VI '- and in good faith from the mortgagee, the suit must be brought within twelve years from the date of the purchase. (As to the meaning of the words " purchaser for value and in good faith," see the case of Radhanath Dass v. Gisborne and Co., 14 Moo. In. App., 1 ; S. C., 15 W. R., P. C., 24.) It is true there is no provision in Act IX of 1871 similar to the proviso contained in section 5 of the pre- vious Act, by which the mortgagor was bound to sue the purchaser within the time limited to a suit for redemption, but there can be no doubt that the morto-asfor will not. under the new Act, have an o O ' ' extended period against the purchaser from the mortgagee. The proviso in section 5 was probably inserted out of excessive caution. It is necessary to observe that the period of sixty years allowed to the mortgagor is wholly irrespec- tive of the nature of the title which the mort- gagee in possession may assert. The enactment itself is a departure from the rule that deriva- tive possession is inoperative for purposes of pre- scription ; and I know of no principle on which, the law being silent, we should be justified in holding that a derivative possessor could, by his own act, change the character of his possession so as to shorten the period of limitation. But even if there was any doubt upon the language of the Act, the fact that the period may be extended by an STATUTE OF LIMITATIONS. 213 acknowledgment shows, tbat the assertion by the LECTUBE VI. mortgagee in possession of a hostile title would not have the effect of abridging the time fixed by the statute. As pointed out by Mr. Justice Hollo way in Tauji v. Nagamma (3 Mad., 137), the period maybe extended by an acknowledgment, but by no process can it be curtailed. I must, however, confess that this view is perhaps not quite consistent with cer- tain reported decisions of the Calcutta High Court. I shall only notice one of these cases, not only because it was decided by a very eminent Judge, but also because it seems to have been the first case in which it was laid down that the period of sixty years may, under certain conditions, be cur- tailed. In Loft Hussen v. Abdul AH (8 W. R., 476), Mr. Justice Dwarkanath Mitter is reported to have held that where more than twelve years had expired from the date of the expiration of the year of grace, the mortgagor lost his right of redemp- tion. It was found in the case as a fact that the foreclosure proceedings were regular, and the Court seems to have thought that the mortgagor was bound to assert his right of redemption within twelve years of the expiration of the statutory year of grace. I must, however, confess that I do not understand the reasoning by which the pro- position is maintained. A plea founded upon the statute always assumes that the plaintiff has theright which he claims, but that he cannot be permitted to 214 ACKNOWLEDGMENT BY MORTGAGEE. LECTURE assert the right successfully in* a Court of Justice by VI '- reason of lapse of time. This being so, I do not see how any proceedings taken by the mortgagee for the purpose of foreclosure could have any other effect given to them than as evidence of a determination by the mortgagee to hold possession, not derivatively as pledgee, but absolutely as owner. But, as I have already endeavoured to explain, the assertion of a hostile title by the mortgagee cannot curtail the period of sixty years which the statute allows to the mortgagor to redeem his property. It may be suggested that the clause which allows a period of sixty years from the date of the mort- gage applies only to cases in which no particular period is fixed for the redemption of the property ; and the fact that the period on any other construc- tion would begin to run even before the accrual of the right to redeem, as also when the possession of the mortgagee was perfectly consistent with the intentions of the parties, might perhaps lend some support to the suggestion. But there is no authority for such a limited construction, and the Privy Council, in Luchmi Bux Roy v. Runjit Ram Panday (20 W. R., 375), held, that the section applies to all descriptions of mortgages. I shall now proceed to discuss the nature of the .'icknowledgment required to extend the period. N"\v. in the first place, it must be in writing and M- UK! by the mortgagee or some person claiming STATUTE OF LIMITATIONS. 215 under him. An acknowledgment, therefore, which is LECTUKE VI. only sealed or signed, not by the mortgagee, but by an agent, would be insufficient. It is, however, not neces- sarv that the acknowledgment should be made to the / cj mortgagor or his representative, and on this point our law differs from the English law on the subject. You will observe that, by the clause in ques- tion, there may be an acknowledgment of the title of the mortgagor or of a right to redeem. An acknowledgment that a certain person is the owner of an estate, is an acknowledgment of the title of that person ; while an acknowledgment that the mortgage is subsisting, would be an acknowledgment of a right to redeem which might be availed of by the person entitled to the property. It is not, therefore, necessary that the person entitled to the equity of redemption should be mentioned in the acknowledgment. This was decided in the recent case of Daia Chand v. Sarfraz (Indian Law Reports, Allahabad Series, 117) by a Full Bench of the Allahabad High Court, who were of opinion that a statement in a record of rights made by a Settlement Officer, that the persons in possession were mortgagees, and signed by the alleged mortgagees, was sufficient to take the case out of the statute. The English law also does not require an express acknowledgment; and any expression referring to the estate as mort- gaged will be sufficient. 216 DIFFERENCE BETWEEN THE ENGLISH STATUTES. LECTURE I have not been able to find any other Indian VI '- case in which the nature of the acknowledgment required for the purpose of enlarging the period of limitation has been discussed; and it may, therefore, I think, be useful to refer to certain English cases in which the question was raised. In one case it appears that the solicitor of the mortgagor wrote to the mortgagee requesting to know when he could see the mortgagee upon the subject of the mortgage, and the mortgagee in reply wrote to say, " I do not see the use of a meeting unless some one O is ready to pay me off." It was held by the Court that this was a sufficient acknowledgment in writing to exclude the statute. (3 DeG., Mac. & G., 620.) An offer by the mortgagee to purchase the equity of redemption has also been held to be a suffi- cient acknowledgment of the right to redeem; while in an old case, which, however, has never been questioned, it was held, that where the mortgagee described au estate in his will as his " mortgaged o O estate," there was an acknowledgment sufficient to take the case out of the statute. (See the cases cited in White and Tudor's notes to Howard v. Harris, pp. 886-891.) I might mention other cases in which the English Courts have permitted the mortgagor to redeem after the expiration of the statutory period on the basis of an acknowledg- ment; but the above, I think, will show how the Court will seize even the slightest act or expression AND THE INDIAN -LIMITATION ACT. 217 of the mortgagee as an acknowledgment of the right LECTURE to redeem. I would conclude by calling your attention to a somewhat remarkable difference between our law and the English statute on which our own is cer- tainly modelled. Our Act speaks of an acknow- ledgment by the mortgagee ; but suppose there are two or more mortgagees, and one of them only makes the acknowledgment, would such an acknowledg- ment be sufficient to take a case out of the statute against both or either of them ? The English Act expressly provides that such an acknowledgment will hold good but only against the mortgagee by whom an acknowledgment may have been made. Our Act is wholly silent, although section 20 pro- vides that an acknowledgment by one of several debtors shall not have the effect of enlarging the period against his co-debtors. Having regard to the way in which our Acts are frequently drawn, it would not be safe to raise any inference upon the omission of any such clause in the article under consideration. The case may be merely one of omission. There is, however, no reported case on the point, and I do not think it necessary to offer any opinion on it one way or the other. 28 LECTURE VII. Usufructuary mortgage What constitutes usufructuary mortgages Per- sonal liability of mortgagor Zuripeshgee leases Difference between Zuripeshgee and ordinary leases Hanuman Persad Pandey's case- Origin of Zuripeshgee leases Rights and liabilities of usufructuary mortgagee before and after repeal of Usury Laws Liability to account Right of redemption of mortgagor Simple usufructuary mortgagee not entitled to decree for sale Limitation. A USUFRUCTUARY mortgage is a very common form of security in this country. The creditor is put into possession of the mortgaged property, the rents nnd profits being applied either to the discharge of the interest alone, or to the gradual reduction of both principal and interest according to the agree- ment of the parties. No formal words are neces- sary to constitute a usufructuary mortgage, although in this, as in other cases, inartificially drawn instru- ments not seldom give rise to much useless litiga- tion. In one case, in which a sum of money being advanced, the person making the advance was put into the receipt of the rents and profits of certain land belonging; to the debtor, it was con- O O ' tended that the transaction was not a mortgage, but a mere license to the creditor to receive the rents which mi-lit be revoked at any time by the debtor. The Court, however, held otherwise, and directed USUFRUCTUARY MORTGAGE. 219 the creditor to render an account of his receipts LECTUBB VII. as mortgagee in possession, (Khusul Rai v. Jankee Dass, 2 Alia., 9.) A very familiar kind of usufructuary mortgage is one in which the profits are enjoyed by the cre- ditor in lieu of interest, the debtor being entitled at any time to redeem the property on payment of the principal. It closely resembles a Welch mort- gage in its incidents. Another form of usufruc- tuary mortgage is that in which the creditor is let into possession on the understanding that he is to enjoy the usufruct till the whole debt is gradually liquidated. This kind of security resembles the vivum vadlurn of the English law, a form of mort- gage which, although once common, has now fallen into disuse in England. The mortgagor, however, instead of mortgaging his whole estate, may mort- gage it for a term of years, and there is one kind of usufructuary mortgage by means of a lease, known as a ^uripeshgee, which forms a class by itself, and deserves careful consideration. I shall explain hereafter the origin and nature of this remarkable class of usufructuary mortgages which possesses a history of its own very interesting to the student of law. But before I do so, I wish to point out that it is not always easy to say whether a transaction is to be viewed as a mort- gage, or simply as a lease. I can only ask you to consult the cases on the poiut, and the only rule 220 DIFFERENCES BETWEEN ORDINARY LEASES that can be safely extracted from tliem is. that the VII. ' intention of the parties must be looked into, and that when " once you get a debt with the security of land for its repayment, then the arrangement is a mortgage by whatever name it is called." In the case of Masuk Amin Sazzada against Mar em Reddy (8 Mad., 34), where, by the terms of the arrange- ment, a pending suit was compromised, and the pay- ment of a balance ascertained to be due was secured by the creditor being allowed to occupy the land for fifty-five years at a fixed rent, of which, after deduction of a certain sum for the maintenance of the debtor, the rest was to be applied to the gradual reduction of the debt, which it was calculated would be satisfied in full in 55 years, the Court held that the transaction was a mortgage, and that the parties in providing for the gradual liquidation of the debt, did not intend to put an end to the rela- tion of debtor and creditor, and that, upon a true construction of the document, it created only a mortgage security. Now, compare the above case with the case of Baboo Kowar Sing v. Dullun Amrit Koer (S. D., 1857, p. 1232), in which there was a lease for twelve years, the lessee advancing a certain sum of money to the lessor, and it being provided that the lessor should be entitled to re-eu- on the expiration of the term, the lessee taking his rhance of good and bad seasons. It was argued that the transaction was in substance a mortgage, AND ZURIPESHGEE MORTGAGES. 221 and th.it the lessee was bound to account as mort- LECTURE VII. gngee in possession. The contention, however, was overruled. The Court, in giving judgment, observ- ed : " The point to consider is, whether there was a fair and reasonable prospect of risk to the debt itself in what the banker (mortgagee) undertook; and, if so, no question of usury can arise out of it, and for the same reason the possession of the lessee cannot be regarded as that of a mortgagee." " "We think that the deed of Bhurun ijara before us is, in fact, an absolute sale of a lease for a fixed period to which the rules common to mort- gage transactions cannot be applied, as the extinc- tion of the original debt is not solely dependent on the receipt of adequate profits, but on profits, what- ever they may be, during the continuance of the lease. Should thev fail, the debt is neither realiz- */ / able from, nor secured by, any other resources. This is no device but a substantial risk, entitling the lender to any benefit from the bargain." It is sometimes said that where the principal is risked, the transaction cannot be regarded as other than a lease. This, however, is by no means gener- ally true, and there may be usufructuary mortgages for terms of years, although the parties may ex- pressly covenant that the creditor shall have no claim against the debtor, either for principal or for interest, after the expiration of the prescribed period. It would be impossible to say that the 922 LIABILITY OF MORTGAGOR. LECTURE principal was not risked in such cases, but there are 1 several instances in our books, in which such trans- actions have been regarded as mortgages redeem- able on the usual terms. It would seem that in a pure usufructuary mort- gage, where the mortgagee takes possession of the estate, on the understanding that he shall repay himself out of the rents and profits, the mortgagor undertakes no personal liability, and the mortgagee must, therefore, look exclusively to the land for the repayment of the debt. In the case of Thaku Beebes (S. D. A., 1850, p. 44), which has since been followed, the Sadder Dewany of Calcutta held that, in the absence of any covenant, the mortgagor can- not be sued personally. A doubt, however, has been thrown upon this doctrine by the observations of the Privy Council in the case of Jugjewan Dass v. Ramdass Brijbliuhun Dass (2 Moo. Ind. App., 487; S. C., 6 W. K., p. 610.) In that case the mort- gage deed contained a clause that the mortga- gee should continue to enjoy and appropriate the annual produce till the whole debt was liquidated. Their Lordships observed that the mortgagee would have a full right to recover this debt by reason of the mortgage, and that the clause in question was merely a power for the mortgagee to satisfy himself just as mi English mortgagee may by taking pos- >i>n of the rents and profits. The case, however, can hardly be regarded as an authority for the pro- COVENANT FOR QUIET POSSESSION. 223 position, that in every pure usufructuary mortgage, LECTURE the mortgagor incurs a personal obligation to repay - the debt. There is a distinction between an English mortgage, with a power reserved to the mortgagee to enter upon possession and satisfy himself out of the rents and profits, and a usufructuary mortgage in this country where there is no covenant by the mortgagor for the repayment of the loan. I have already had occasion to point out that in India there is no implied personal obligation in a mort- gage by conditional sale, and the same distinction would also seem to hold good in the case of usu- fructuary mortgages. I need, however, hardly point out that the mortgagor may expressly agree to be personally responsible, and it would no doubt be ex- tremely convenient to the mortgagee to insist upon such a covenant by the mortgagor. The mortgagor, however, is bound to deliver over possession of the property to the mortgagee and to secure his quiet possession. If, therefore, the mort- gagor should refuse, or be unable, to put the mort- gagee in possession of the mortgaged property, the mortgagee may sue him at once for the recovery of his money. (Rajah Odit Perkash Sing v. Martindell, 4 Moo. Ind. App., 444 ; see also S. D , 1859, p. 118.) Again, if the mortgagee should, before the debt has been liquidated, be disturbed in his posses- sion by the mortgagor, or persons claiming under him, the mortgagee is not bound to bring a suit for 224 ZURIPESHGEE LEASES. LTus possession, but may sue for the balance due to bim, and the mortgagor will be personally directed to pay it. (N. W. P., Vol. XI, 115 ; S. D. A., 1856, p. 846 ; N. W. P., Vol. VIII, 286.) In connection with this topic I may mention that the right created by a usufructuary mortgage is a real right, and that, although the mortgage deed may contain a covenant for the repayment of the money by the mortgagor in the event of the eviction of the mortgagee, the mortgagee is not bound to sue for the money, but may maintain ejectment, his right to possession as mortgagee not being inconsistent with his right to briiis; an action against the mortgagor. o *^ cj o o I will now proceed to treat of ztiripeshgee leases. A zuripeshgee lease, or a lease for a consideration, is in form a lease by the debtor to his creditor on a fixed rent reserved by the lease, which is generally a little over the amount of interest payable by the debtor. The excess is paid to the debtor, and is called huq haziree, the rest being retained by the creditor in discharge of the interest. The lease is generally for the term during which the loan is to remain out at interest, although there is usually a provision to the effect that, if the loan is not repaid on the appointed day, the lease is to continue for such further period as the debt may remain unpaid on the same conditions. Thus, suppose Ks. 10,000 are lent at 6 per cent, repayable in five ye:u-. the interest on the whole sum would be PtS. COO THEIR ORIGIN. 225 per annum ; the debtor gives a lease of his pro- LECTUEE VII perty for five years at a rent, say of Rs. 650 per - annum, the Rs. 50 representing the huq haziree, and the Rs. 600 the interest, which the creditor retains under the terms of the agreement between the parties. The excess, however, instead of being paid to the mortgagor is not unfrequently applied to the gradual reduction of the principal. I have already said that zuripeshgee leases have a history of their own. They were originally invented to evade the laws against usury, which con- tinued in the Indian Statute Book from 1793 down to a very recent period, when they were repealed by Act XXVIII of 1855. It is not necessary to dwell at any length on the usury laws, but as they moulded the law of securities on the principles introduced by the Regulations, and as cases sometimes still occur, in which the old law has to be applied, I think it necessary to draw your attention to some of the leading provisions on the subject. Regulation XV of 1793, by which the maximum rate of interest was limited to 12 per cent., after enacting in the 10th section, that all mort^asfes are to be considered as ' O O virtually and in effect cancelled and redeemed, whenever the principal sum, with the simple in- terest due upon it, not exceeding 12 per cent., shall have been realized from the usufruct of the mortgaged property, provides in the next section for the adjustment of the accounts in the cases of 29 xrilll'KSIKiEEDAR r.r. HIRE mortgages specified in section K). " Where the v 1 1 shall have had the usufruct of the mort- property, the mortgagee is to be required to deliver in the accounts of his gross receipts from the property mortgaged, and also of his expenditure for the management or preservation of it. The mort- gagee is to swear, or (if he be of the description of persons whom the Courts are empowered to exempt from taking oaths) to subscribe a solemn declaration, that the accounts which he may deliver in are true and authentic. The mortgagor is to be permitted to examine the accounts, and after hearing any objections he may have to offer, or any evidence that either party may have to adduce respecting them, the Court is to adjust the account." You will observe that these enactments rendered it extremely difficult for the mortgagee to realize more than 12 per cent, on the principal money. If he entered upon possession, he was liable to account for the rents and profits, and anything received in excess of the rate of interest sanctioned by the law was applied to the reduction of the principal. Mortgagees thereupon hit upon the expedient of entering upon possession, not as mortgagees, but as at a fixed rent. The lease was sometimes taken in the name of a third person, but the object in either c&M was the same, to evade the liability, which the Regulations imposed upon the mortgagee in po>se>sion. Such a transparent device was, LIABLE TO ACCOUNT. 227 however, not sanctioned by our Courts of Justice, and LECTURE VII. zuripesbgee leases were regarded as mortgages, and tbe mortgagee was not permitted to use them as a shield against the claim of the mortgagor for an o O O account. The rule was not relaxed even when the rent reserved by the lease was shown to be a fail- rent. In the case of Hanuman Persad Pandey, in which the mortgagee insisted that he was in pos- session only as lessee, and was not liable to account for the gross proceeds, the rent reserved on the lease not being shown to be unfair, and it not being- suggested that there was any attempt to evade the usury laws, Lord Justice Knight Bruce, in giving the judgment of the Privy Council, observed : " One point remains to be considered, namely, whether, in taking the account between these parties, the defend- ant is to be charged as mortgagee in possession, with the actual rents and profits, or only with the rent fixed by the pottah. It is said for the appellant that the Sudder Dewany Adawlut did not set aside the pottah. In terms they certainly did not. But their Lordships think that it was part of one mortgage security, consisting of several instruments of equal date with the mortgage bond ; and that it was intended to create, not a distinct estate, but only a security for the mortgage money. Mr. Palmer contended that a stipulation, such as this pottah evi- dences, may stand in India between mortgagor and mortgagee, and that the Regulations as to interest do 228 REDEMPTION. LECTURE not touch such a case. The Regulations provide for VII. *" the case of an evasion of the law as to interest by invalidating the mortgage security, and forfeiting the claim of the mortgagee to the principal and interest ; but Mr. Palmer contends that, where there is no such evasion, and a bond fide and fair rent is fixed upon as representing communibus annis, the rents and profits of the estate, the Court ought to stand on that agreement of the parties, and not to direct the taking of the accounts between mortgagor and mortgagee on any other basis. It is certainly possible that, by reason of the provision that the rent shall be a fixed one, notwithstanding losses and casualties, the mortgagee might be a loser, in his character of lessee, on an account cal- culated on this basis ; but, notwithstanding that contingency, their Lordships think that, as it was not meant that the principal should be risked, it was virtually a provision to exclude an account of the rents and profits, and that the decree of the Sudder Dewany Adawlut, directing an account of the actual rents and profits, therefore proceeds on the right principle, and it is in accordance with the true nature of the security and the spirit of the Regulations. " In the case of Roy Juswant Lall v. Sree Kishen Lull (14 S. D. A., 1852, p. 577) the Court seems to have thought that, where a mortgage lease was u ranted, and whilst the term was running, the REPEAL OF THE USURY LAWS. 229 mortgage account could not be taken ; but it appears LECTURE VII. from that case that, in former decisions of the Court, not reported, where the lease had expired, the Court directed the account to be taken on the ordi- nary footing of the receipts of rents and profits of the mortgaged estate. Their Lordships think that, under the Regulations, unless the principal is meant to be risked, and is put in risk, the estate created as part of the mortgage security, whatever be its form or duration, can be viewed only as a security for a mortgage debt, and must be restored when the debt, interest, and costs are satisfied by the receipts." It followed, therefore, that not only could the mortgage be redeemed before the end of the term, but that the rent reserved on the lease could not be taken as settling beforehand the annual amount with which the mortgagee was to be chargeable in account. The arrangement might be in every res- pect a fair one, but our Courts, in their anxiety to protect the debtor from usurious contracts, refused to give effect to such an agreement. The position, however, of the usufructuary mort- gagee has been greatly modified by the repeal of the usury laws, and I shall therefore ask you care- fully to contrast the rights and liabilities of the usufructuary mortgagee as they stood before the repeal of the usury laws, and as they stand at the present day. 2;>() EFFECT OF THE REPEAL URE I liave already stated that down to the year 1855, 1 a usufructuary mortgage, whatever might be the terms of the contract between the parties, came to an end by virtue of the enactment contained in Sec- tion 9 of Regulation XV of 1793, as soon as the prin- cipal, together with interest at 12 per cent, if no lower rate should have been agreed upon between the par- ties, was realized from the usufruct of the mortgaged property, or otherwise liquidated by the mortgagor. The mortgagor, therefore, might redeem the property at any time, and, as in the case of conditional sales, the Court was bound to allow him to do so without any regard to the period mentioned in the mortgage. There might, perhaps, be good reasons for enacting that the mortgage should be cancelled as soon as the money was realized from the usufruct, but it is diffi- cult to see why the mortgagee should be compelled to be paid off by the mortgagor before the appointed time. There is, perhaps, no system of law which guards the rights of the mortgagor with greater jealousy than the English, and yet the Court of Chancery, in the absence of any fraud or improper dealing, will not set aside an agreement, postponing the equity of redemption to a long deferred day, and in one case, the Court refused to relieve the mort- ^or, even though he offered to pay the whole of tho interest receivable by the mortgagee in advance. o o The mortgagor, therefore, under the Regulations, had the right to redeem at any time on payment of OF THE USURY LAWS. 231 the money due, either on account of principal, or LECTUKE VII. interest, or both, and it was no answer to such a - suit that the term for which the mortgage had been granted had not expired, or that the money had not been realized from the usufruct. The position of the zuripeshgeedar, perhaps, deserves a closer examination. I have already called your attention to the light in which zuripesh- gee leases were always regarded by our Courts. They were not regarded as mere leases, and could not therefore be set up as a defence in an action by the mortgagor for possession instituted before the expiration of the term. It is true that the decisions of the Sudder Dewany Adawlut of Calcutta at one time showed a considerable fluctuation of opinion, but all the more recent authorities are in favor of the view that a zuripeshgee, before the repeal of the .usury laws, might be redeemed, even before the expiration of the term. (Pungun Sing v. Amina Khatun, 6 W. R., 6; S. D. A., 1860, p. 174; S. D. A., 1852, pp. 280, 304.) I will now discuss the nature of usufructuary mortgages created after the repeal of the usury laws. The utmost latitude is now given to the parties to contract in any manner they choose, and the restrictions, which the Regulations imposed on the creditor, have been wholly withdrawn. While the usury laws were in force, the mortgagee was bound to account for the gross profits, allowance 232 RIGHTS OF MORTGAGOR AND MORTGAGEE. LECTURE being only made for necessary outlay and expenses VII 1 of collection, and the mortgagor could not deprive himself of this right even by contract. Since the repeal, however, of those laws, the mortgagor and mortgagee may make any contract they please, and the mortgagor may by contract deprive himself of the right to call for an account of every farthing received by the mortgagee out of the estate. In the case of Munnoo Lall v. Reet Bhoobun Singh (6 W. R., 284), the Court observed : " With re- gard to the first part of the contention that a mortgagee in possession is bound in every case to account for the profits, and that a mortgagor can- not by contract deprive himself of his right, it is no doubt true that, while the usury laws were in force, a restriction in this respect did certainly exist. But this prohibition on the free power of the parties to contract as they please was solely a consequence of the usury laws then in force ; and on the aboli- tion of those laws, the restriction in question fell with them. By Section 4 of Act XXVIII of 1855, it is expressly enacted that an agreement that the use of usufruct of any property shall be allowed in lieu of interest, shall be binding upon the parties. We are of opinion that a mortgagor and mortgagee are now at liberty to make what contract they please with reference to the profits of the mortgaged estate." This case is, therefore, an authority that the mortgagor is at liberty to contract in any REDEMPTION OF ZURIPESHGEES. 233 manner he pleases, and will not be relieved from any LECTUEB covenant binding him not to ask for an account of '. the actual profits. A zuripeshgeedar, therefore, is, as the law now stands, bound to account, not for the profits actually received by him out of the estate, but only for the rent reserved on the lease. The question has arisen whether a zuripeshgee, created since the repeal of the usury laws, may be redeemed before the expiration of the term specified in the deed ; and the reported cases on the point show the inclination of our Courts to treat zuripeshgees as ordinary leases, which cannot be put an end to before the expiration of the term for which they have been created. Zuripesh- gee leases, however, are seldom intended to create a distinct estate, but are only effected as security for the mortgage money. In this view, it would perhaps be difficult to treat them as ordinary leases. Be that, however, as it may, there is little doubt that a zuripeshgee, created since the repeal of the usury laws, cannot be redeemed before the term for which it has been executed has expired. (Khajeh Lootf AH v. Goozraz Tliakoor, 11 W. R., 428; Soorjun Chowdry v. Imam Bandee Begum, 12 W. R., 527.) It is perfectly valid as an agreement settling beforehand the annual amounts with which the mortgagee would be chargeable in account, and as the equity of redemption may be postponed to any day that the parties may agree upon, I do 30 234 DECREE FOR SALE. LECTURE not think that the Court will permit the mortgagor to pay off the mortgage money and re-enter upon the estate before the expiration of the term for which the zuripeshgee has been created, that being the period fixed for the redemption of the mortgage. It may, no doubt, be suggested that, in the absence of any express stipulation, postponing the right of redemp- tion, the mortgagor ought to be permitted to redeem, but except in very badly-drawn instruments, there is sufficient indication of the intention of the parties, that the money shall be repaid on the determina- tion of the term for which the zuripeshgee is effect- ed, and as in the case of an ordinary creditor, the' mortgagee has the right to refuse payment at an earlier date. It may, perhaps, strike some of you, that it is of no consequence whether you treat the zuripeshgee as a lease on a reserved rent, or as an : cement settling the basis on which the accounts between the parties are to be taken. This, however, is by no means so, and the distinction is an import- ant one, as I shall endeavour to show in the next lecture. In either view, however, a zuripeshgee is valid since the repeal of Regulation XV of 1793 as an cniraucinent excluding an account of the actual profits realized by the mortgagee in posses- MOII. It is necessary to observe that, in the absence of any express contract, a zuripeshgeedar has no right cT to foreclose or to sell the property comprised STATUTE OF LIMITATIONS. 235 in the zuripeshgee. In a recent case, the Court LECTURE VII observed : " Although it is true that these leases ' are treated by the Courts as usufructuary mort- gages, and that parties to them have to some extent the rights of mortgagor and morte;ao;ee, it does O O O DO* not follow that in a case of this kind the lessee is entitled to have the property sold. To do that would be to give him a greater security than he has stipulated for. All that has been held by the Courts in regard to transactions of this kind, as I understand it, is, that the parties ought to be con- sidered, not simply as lessor and lessee, but as mortgagor and mortgagee, the lease being granted as a security for repayment of the money. This would put the lessor in the position of a mortgagor and give him the rights of a mortgagor, and, to the extent of the security given, would put the lessee in the position of mortgagee with the rights and liabilities attached to that character. What is now asked for is beyond that. We think that the deci- sion of the lower Appellate Court is right, and that the plaintiff is not entitled to the decree which he sought in this suit." (Kewal Sahu v. Rash- narain Sing, 13 W. K., 446.) A zuripeshgeedar, to whom the property itself is not pledged, has therefore a very imperfect security. A usufructuary mortgage may be redeemed within the same period as any other mortgage. Before the passing of Act XIV of 1859, however, a usufruc- 236 USUFRUCTUARY MORTGAGE. LECTUEE tuary mortgage might be redeemed at any time, but, VII 1 as the law stands at present, the mortgagor must exercise the right of redemption within sixty years from the date of the mortgage, or of a written acknowledgment. There are many other points connected with usufructuary mortgages, which, however, I propose to discuss in the next lecture when I come to treat of accounting. LECTURE VIII. Liability of mortgagee in possession to account Regulation XV of 1793 Meaning of " gross receipts" Mortgagee not competent to create middlemen Allowance for expenses of collection Practice of our Courts Nature of accounts which mortgagee is bound to produce Verification of accounts Right of mortgagee to interest not exceed- ing 12 per cent. Shah Makhun Loll v. SreeTiissen Sing Liability of mortgagee since Act XXVIII of 1855 Zuripeshgee leases Allowance for necessary repairs Improvements how far allowed Payment of Government revenue Mode of taking accounts- Liability of mortgagee after notice of subsequent encumbrance Mortgagor not liable to account Mortgagee not a trustee for mort- gagor Wassilat distinct from usufruct Mortgagee chargeable with occupation rent Suit for redemption Practice of the Courts in Bengal Procedure in such cases elsewhere. I STATED in the last lecture that the position of the mortgagee in possession has been considerably modified by the passing of Act XXVIII of 1855. It will, therefore, be convenient to deal in the first place with mortgages governed by Regulation XV of 1793, and then to deal with those which are governed by Act XXVIII of 1855. In mortgages created before the repeal of the usury laws, the mortgagee, if in possession, is bound to account for the gross proceeds, allowance how- ever being made for the " costs of collection and preservation of the estate in mortgage," and any contract excluding an account of the actual rents 238 GROSS RECEIPTS. LECTUBE and profits, is, as I said in the last lecture, wholly ' inoperative. The duty of the mortgagee is defined in Section 11 of Regulation XV of 1793, which says: "For the adjustment of the accounts, in the cases of mortgages specified in Section 10 where the mortgagee shall have had the usufruct of the mortgaged property, the mortgagee is to be required to deliver in the accounts of his gross receipts from the property mortgaged, and also of his expenditure for the management or preservation of it. The mortgagee is to swear, or (if he be of the description of persons whom the Courts are empowered to exempt from taking oaths) to subscribe a solemn declaration, that the accounts which he may deliver in are true and authentic." Now, although the section speaks of the gross receipts, they must be such as the mortgagor himself could have realized before the mortgage. 3 O ' and if he could not by reason of an intervening lease call for the account of the collections, neither can the mortgagee. The terms of the law are not inflexible, and must receive a construction such as may suffice to accommodate its provisions to the variable and different natures of estates and possession. (Shah Makhun Loll v. Sreekissen Sing, 12 Moo. Ind. App., 157; S. C., 11 W. R., P. C., I 1 '.) The mortgagee, however, must not create a middleman between himself and the tenants, and ALLOWANCE FOR COLLECTION. 239 if lie does so, he is not relieved from the responsi- LECTURE VIII bility of accounting for the gross rents payable by ' the tenants. (S. D. A., 1852, p. 1137; S. D. A., 1857, p. 1513.) The mortgagee, however, is not an assurer of the continuation of the same rate of profit as the mortgagor was able to raise, although he is liable O O ' O for the non-receipt of profits which he might have received with common care and attention. In taking the accounts, our Courts usually hold the mortgagee answerable for the rents exhibited in the rent-roll of the estate in the absence of any satis- factory explanation as to the reasons for the non- realization of any portion of the rents. The rule may, in certain cases, operate with hardship upon the mortgagee, but it is well calculated to prevent fraudulent practices. You will observe that the mortgagee is entitled to the expenses of collection, and a fixed percentage on the gross collections is generally allowed to him varying from 5 to 10 per cent. In one case, however, the Court observed: "No item should be allowed to the mortgagee which is not either admitted by the mortgagor, or supported by evidence of some sort. For instance, neither 10 per cent, nor 5 per cent, should be allowed for collection charges, but only so much as the expenses of collection actually amounted to, and if proper vouchers for this are not forthcoming, at least some 240 ACCOUNTS. LECTURE evidence should be adduced sufficient to lead to a ' reasonable estimate of what the expenses under this head probably were." (Mukund Loll Sukul v. Goluk Chunder Dutt, 9 W. R., 575.) I need hardly observe that the accounts which the mortgagee is bound to deliver must be full and complete. They must exhibit detailed items of all actual receipts and disbursements, and must be accompanied by all vouchers. In one case in which the mortgagee put in certain jumma-wasil-bakee papers, the Court observed : " Jumma-wasil bakee papers, although they may, and perhaps may very strongly and directly, support a mortgagee's account put in under the law (section 3, Regula- tion I of 1798), are not and cannot be that account itself. That account which the mort- gagee by law has to put into Court, is not that of his agent or tehsildar, given by the latter for his master's (the mortgagee's) information as to such agent's collections. The jumma-wasil- bakee paper, however, is this latter only. The account to be put in under the law is one to be made, verified, and proved by the mortgagee him- self in the way before indicated. His jumma-wasil- bakee papers duly attested by those who prepared them, or who collected according to them, and supported by the receipts of the talookdars or ryots, who also may be called to depose to tll( ' -its and to what was the real demand, VERIFICATION BY MORTGAGEE. 2 11 collection, and balance of each of their respective LECTUBB tenures, may well be adduced to support the mort- gagee's own account when made and put into Court under the law cited. " In fact, the account required from the mortgagee is one setting forth what he has realized, from what portions of the mortgaged property, in what terms or periods, with what loss and gain on the several assets, with what necessary reductions, and what remains then as the net profits which can be taken as actual realizations towards liquidating the sum due under the mortgaged transaction." (Mohun LollSukulv. Goluk Cliunder Dutt, 5 W. R., 276). It used to be thought at one time that the ac- counts must, in every case, be verified by the mort- gagee himself, and that the terms of the law were inflexible. The Privy Council, however, observed in a recent case : " Their Lordships think that the language which, like other provisions of the earlier Regulations, is curt and applied to the more com- mon cases, must, to preserve even the spirit of the enactment itself, be construed reasonably, as admit- ting in case of necessity, of some delegation, also in the person deputed to perform the duty of attesting the accounts. If the general manager who did all, and knows all ; with whom the mortgagors, with that knowledge, contracted ; whose name is used ; whose accounts in one sense they are ; and who far more than mere representatives knowing 31 242 DUTY OF MORTGAGEE. LECTURE nothing of their own knowledge of the transactions, VIII. satisfies the spirit of the law, swears to the truth of them, it is such a reasonable compliance with the spirit of the law, at least that its performance, in a case circumstanced like the present, by a substitute, furnishes no ground whatever, for suspecting mal- practice or designed evasion of the law ; and with that alone, their Lordships are concerned in this case, since the mere mode of the verification lias no other importance in this case than as it raises a case of suspicion against the accounts them- selves." (Shah Makhun Loll v. SreekisJien Sing 12 Moo. Ind. App., 157; S. C., 11 W. R-, P. C., 25.) The necessity for an account, however, does not arise in every case. In the case of a usufructuary conditional sale for instance, the mortgagee is bound to account only when the mortgagor has deposited the principal, leaving the question of interest to be afterwards settled, or has deposited all that he alleges to be due, or asserts that the whole of the debt has been liquidated by the usufruct. (Forbes v. Ameerunissa, 10 Moo. Ind. App., 340.) If the mortgagee refuse or neglect to deliver in the accounts, the Court must take the best evidence available and decide upon it. The general presump- tion will, no doubt, be against the mortgagee; but this would not justify the Court in accepting without examination any evidence which may be ottered by the mortgagor. Presumptions in odium THE USURY LAWS. 243 spnlitoris have known limits, although it may fairly LECTURB be doubted if those limits have not been overstepped in some of the cases in the books. I have already said that in a mortgage, created before the repeal of the usurv laws, the morto-a^ee * %/ i O O cannot take any higher interest than 12 per cent, on his money. He may, no doubt, agree to take less, and such agreement will be binding upon him. But he cannot in any case exceed the limit fixed by the Regulation. Cases, however, may occur in which the interest reserved by the mortgage will not be the true measure of the annual stipulated return for the loan. A very interesting question on this point arose in the case of Shah Makhun Loll v. Sreekissen Sing. The interest reserved by the instrument of mortgage was 9 per cent., but the mortgagor, as part of the transaction, executed a lease in favor of the mortgagee, which would leave to the mortgagee an annual profit of something more than 3 per cent, on the principal money. The mortgagee thus secured to himself a return of something more than 12 percent, on his money. The morteasror brought a suit, not for avoiding the tj ' ; O * O transaction altogether as a device to evade the laws against usury, bat for redemption, and contended that, under the Regulation, the mortgagee, while he could not demand more than the rate of interest specified in the deed of mortgage, was bound to account for the actual collections, and that such 244 THE USURY LAWS. mi- account could not be excluded by the lease which ' was only part of the mortgage security. The Privy Council, while holding that the mortgagor had a rio-lit to insist on the morto-as-ee's accounting for the Q J O O actual collections, were of opinion that the latter was entitled to have the bargain performed, so far as the law allowed, and that the rate of interest reserved by the mortgage was only a part of the annual stipulated return for the loan which would not have been granted at 9 per cent, only, the rate men- tioned in the deed of mortgage. In giving judg- ment their Lordships observed : " It is clear that if the morto-ao-ees had been suinsr the mortsracror on O o O O O the mortgage deed for the debt, they could have recovered nohigher rate of interest than 9 per cent., the contract being in writing and incapable of being varied by parol evidence ; but this is by no means decisive of the question, for, supposing that the extra profits on the several engagements forming one mortgage security had amounted only in the whole to 3 per cent., making a 12 per cent, only in all, precisely the same consequence would have ensued ; the reserved interest would have been correctly viewed as constituting part only of the profit, and as such would have been all that the parties stipulated for as to that part of the transac- tion ; but it would not have measured the stipulated return for the loan annually. The rules of evidence and the law of estoppel forbid any addition to, or THE USURY LAWS. 245 variation from, deeds or written contracts. The law, LECTURE however, furnishes exceptions to its own salutary ' protections ; one of which is, when one party for the advancement of justice is permitted to remove the blind which hides the real transaction, as for instance in cases of fraud, illegality, and redemp- tion, in such cases the maxim applies that a man cannot both affirm and disaffirm the same transac- tion to show its true nature for his own relief, and insist on its apparent character to prejudice his adversary. This principle, so just and reasonable in itself, and often expressed in the terms that you cannot both approbate and reprobate the same transaction, has been applied by their Lordships in this Committee to the consideration of Indian appeals as one applicable also in the Courts of that country which are to administer justice accord- ing to equity and good conscience. The maxim is founded not so much on any positive law, as on the broad and universally applicable principles of justice. The case of Forbes v. Amerunisxa Begum (10 Moo. Ind. App., p. 356) furnishes one instance of this doctrine having been so applied, where it is said in the judgment of their Lordships : ' The respondent cannot both repu- diate the obligations of the lease and claim the benefit of it,' Unless, therefore, some positive law has said that, in cases similar to the present, the written engagement, though not extending to 24C ZURIPESHGEE LEASES. LECTURE the wbole profit stipulated, must be adhered to VIII against the defendant, though the plaintiff may go beyond it to show the full extent of the profit, and so to be relieved from the consequences of his actual contract, their Lordships must hold that the bargain disclosed should be performed so far as the law allows ; in other words that 12 per cent, was in this instance the interest to be computed." (Shah Makliun Loll v. Sreekishen Sing, 12 Moo. Ind. App., 157; S. C., 11 W. R., P. C., 21.) We saw in the last lecture that, since the repeal of the laws against usury, a mortgagee may always relieve himself from the liability of accounting for the actual profits by an agreement with the debtor. The prohibition on the free power of the parties to contract in any manner they please has been withdrawn. The profits may be either taken in lieu of interest (Section 5), or the parties may agree upon a certain sum beforehand, as the basis on which the account between them is to be taken, and this brings me back to the question of zuripesghee leases. You will remember that our Courts refused to acknowledge zuripesh- ia as leases on a reserved rent, because they illicit be made the means of obtaining usuri- O CJ ous interest. That argument cannot any longer hold good, now that the laws against usury have M r< -pealed, and a mortgagee, entering into ion as a zuripeshgeedar, will probably be REPEAL OF THE USURY LAWS. 247 now regarded, not as mortgagee in possession, but LECTUBH as lessee at a fixed rent. (Lee. VII.) In any point of view, however, the relation is so peculiar that we must be cautious in extending to it all the incidents of an ordinary tenancy. The English Court of Chancery, however, looks upon such transactions with extreme jealousy ; a jealousy which has not been relaxed by the repeal of the usury laws. u One effect," says Vice-Chancellor Stuart, " of the repeal of the usury laws was to bring into oper- ation, to a greater extent than formerly, another branch of the jurisdiction of the English Equity Courts, namely, the principle which prevented any oppressive bargain, or any advantage exacted from a man under grievous necessity, from pre- vailing against him." " In order," adds the learned Judge, " to render a contract or an agreement of any kind binding, there must be the assent of both parties to the agreement, under such circum- stances as to show there was no pressure, no influ- ence existing of a kind to make the assent an O imperfect assent, or an assent which, under other circumstances, would have been refused. If the assent to the agreement is not an assent given under such circumstances as that both parties are on an equal footing, and the agreement one perfectly free from any influence or pressure in the eye of this Court, it is not an assent sufficient to constitute an agreement" (Barret v. Bartly, 2 L. R , Eq., 795.) 243 MORAL SENTIMENTS. LECTURE It mav, however, be suggested that such a doc- VIII ' trine, unless fenced in by limitations, which would narrow its application only to very exceptional cases, is likely to introduce the very same evils which the Legislature intended to remove when it applied the sweeping brush to the usury laws in our statute book. Indeed the doctrine itself in its relation to debtors and creditors is a " survival." It is another illustration of the " half-conscious repulsions " which we feel to doctrines which we cannot deny. In speaking of them Sir Henry Maine says : " It seems to me that the half-conscious repulsions which men feel to doctrines which they do not deny, might often be examined with more profit than is usually supposed. They will some- times be found to be the reflection of an older order of ideas. Much of moral opinion is no doubt in advance of law, for it is the fruit of reliiis or philosophical theories having a different origin from law, and not yet incorporated with it. But a good deal of it seems to me to preserve rules of conduct which, though expelled from law, linger in sentiment or practice. The repeal of the usury laws has made it lawful to take any rate of interest, yet the taking of usurious interest is not thought to be respectable, and our Courts of Equity have evidently great difficulty in bringing thein- ^'Kes to ;l ,-oinplete recognition of the new prin- ciple." (Maine's Village Communities, p. 195.) ALLOWANCE FOR REPAIRS. 249 I have dwelt at some length on the point, as there LECTUBE VIII. are indications at the present moment of a desire on the part of our Courts to introduce into this country some of the doctrines of the English Court of Chancery, which rest, not upon the basis of economical science, but upon certain vague moral sentiments, which lie outside the pale of positive law. We saw that since the repeal of the usury laws, a mortgagee may not only receive the rents and profits in lieu of interest, but he may also protect himself from accounting for the actual receipts by an agreement with the mortgagor. In the absence, however, of any such agreement, the mort- gagee is still bound to account for every farthing received by him out of the estate, and he will not only have to account for the rents actually realized, but also for such as he niio-ht have received but for o his wilful default. A mortgagee, however, is entitled in account to any outlay made by him in the preservation of the pro- perty, as for necessary repairs, and interest is gener- ally allowed on the amount of the outlay at the rate reserved by the mortgage. In the case of Jogendra- nath Mullick v. Rajnarain Palooye, Mr. Justice Kemp observed : " Under the law as administered in this country, a mortgagee in possession is in the position of a trustee. The mortgagee must use the mortgaged premises as liable to become the property 32 250 ALLOWANCE FOR REPAIRS. LECTURE of the mortgagor, and must not do anything to v 1 1 r ' diminish the security upon which the money was lent. In this case, the mortgaged property was a thatched house. To allow it to fall out of repair and to become uninhabitable, would have been diminishing- the value of the security on which the o / money was advanced, and preventing the mortgagor from paying off the debt from the usufruct. It is the bounden duty of the mortgagee in possession to keep the premises in necessary repair, and he will be allowed to charge for the same with interest." (9 W. R., p. 488; See also 5 Bom., 114; 5 Bom., 116.) You will observe that in the judgment of the v C3 Court in Jogendranath Mullick v. Rajnarain Palooye, it is said that it is the duty of the mortgagee to keep the mortgaged premises in repair. This is no doubt true in a certain sense, but the proposition requires one qualification. A mortgagee is not bound to make any outlay, even in necessary repairs, except where there is a surplus left after the deduction of the interest from the rents. Any other rule would be excessively harsh to the mortgagee. To sum up what I have said, the right of the mortgagee to be reimbursed for necessary repairs is not co-extensive with his liability to ;m>\ver for non-repair by which the mortgaged pre- mises may be diminished in value or wholly destroyed. The moitmmee in possession is not bound to rebuild ALLOWANCE FOR IMPROVEMENTS. 251 a ruinous house, or increase his debt by laying out LECTURE anything beyond the rent. The property may ' deteriorate by lapse of time, or even owing to want of repair, but the mortgagee will not be held answerable in the absence of gross or wilful negli- gence. The extent to which the mortgagee may safely go in repairing the mortgaged estate, is thus laid down by Fisher in his work on mortgages, DO' and the rule has been followed in this countrv as / founded in equity and good conscience " The mortgagee will be allowed for proper and necessary repairs to the estate, and if buildings are in- complete or become ruinous so as to be unfit for use, he may complete or pull them down and rebuild for the preservation of his security. And the rebuilding or repairing may be done in an improved manner and more substantially than before, so that the work be done providently, and that no new or expensive buildings be erected for purposes different from those for which the former- buildings were used, for the property when restored oiio-nt to be of the same nature as when the o mortgagee received it; and if it be thus wholly, or in part, converted from its original purposes, the money expended will not be allowed to be charged upon it." (Fisher on Mortgage, p. 887 J The question of improvements presents much greater difficulty. It would, however, seem that as a rule, allowance will not be made to the mortgagee 52 SALVAGE. LECTURE for improvements, even of a lasting kind, unless VIII they are made with the sanction of the mortgagor, or are absolutely necessary for the preservation of the estate. The mortgagor must not be improv- ed out of the estate. (Sandon v. Hooper, 12 L. J. Ch., 309.) In the absence of any express contract to the contrary, it is the duty of the mortgagee in posses- sion to pay the Government revenue, and if the mortgagee wilfully default to pay the revenue and purchase the property himself, the Court will fasten a trust upon the purchase in favor of the mortga- gor. The mortgagee, who properly or improperly allows an estate to fall into arrear, cannot purchase it, so as to acquire an irredeemable interest- (Nawab Sid/ii Nazzir Ally Khan v. Adjudha- ram Khan, 10 Moo. Ind. A pp., 540 ; 5 W. R., P. C., 83 ; See also Raja Adjudharam Khan v. A.shootosh Dey, Supreme Court, 6th July, 1855, and Kelmll v. Freeman, Englishman, 4th September 1854.) Any payment, however, made by the mortgagee, either to prevent a forfeiture, or a sale for non- payment of revenue or rent, will be credited to him in account. \\iNurjoon Sahoov. Shall Moozeerood- deen (3 W. R., 26), which was a suit to redeem a usufructuary mortgage on payment of the princi- pal only, there being no stipulation for interest, the mortgagee in his defence insisted upon his righ to retain possession so Ions: as the sums which he SALVOR'S LIEN. 353 had been obliged to pay as revenue, the estate liav- LECTURE VIII ing been assessed with revenue subsequently to the mortgage, were not repaid by the mortgagor or rea- lized from the rents and profits, the Court obser- ved : " Ordinarily the law gives to a person interested in land alien against the defaulting owner for sums of money paid by the former in discharge of the public revenue. The payments made by the defend- ant appear to us to entitle him to a lien within this principle. His equitable claim to such protec- tion is certainly not diminished in this case bv the fact that the plaintiff has pledged to him, as lakhe- raj, land which was not valid lakheraj, and has now been actually assessed with revenue ; nor can the plaintiff contend that the annual receipts from the land, which, when it passed into the defendant's hands, were clearly to be appropriated solely, to the defendant's use (subject to the mortgagor's right to an account), became subsequently bound for the mortgagor's benefit, although in violation of his express agreement to discharge his estate from the lien of the person who actually paid the revenue. This right is, we think, sufficient to qualify the other- wise undoubted right of the mortgagor to redeem his land on payment of the principal alone. If we gave effect to the latter right in the present suit, we should, in the probable event of the mortgagor re- quiring no accounts of the mortgagee's receipts while in possession, leave only to the mortgagee a 254 MODE OF TAKING ACCOUNTS LECTURE doubtful remedy by suit for the money which he has ' paid, a great portion of which would be met by setting up the law of limitation as a defence." I shall now discuss the mode of taking accounts against the mortgagee in possession. The gross collections are ascertained at the end of each year, and after deducting the necessary outlay on account of revenue, expenses of collection, and preservation of the estate, the balance goes to reduce either in . whole or in part the interest, and if. there is a surplus over, it goes to the reduction of the princi- pal ; the account being closed at the end of each year. In England it is not of course to direct annual rests against the mortgagee in possession, but a different rule obtains in this country. If, however, the mortgage debt is paid off by means of the rents and profits during the possession of the mortgagee, he will ordinarily be liable to pay interest on all subsequent receipts. The question of the liability of the mortgagee in possession after assignment, when it is not made with the assent of the mortgagor, for the rents and profits received by the assignee, does not seem to have been ever raised in this country. In England, the mortgagee continues to be liable on the principle that the mortgagee must be responsible for the ]'K in. arc often extremely vague. They should, therefore, be applied with very great caution. Various liens, for instance, are recognised by the Civil law and the Continental Codes, which find no place in the English system. The lien of the MAHOMEDAN LAW. 275 lender who advances money for the purchase of land, or for repairing a building, or of the architect or laborer employed in the construction of any works, is not recognised by the English Court of Chancery; and yet it would be difficult to deny that the creditor in the one case, and the architect in tho other, have at least as strong an " equity " in their favor as the unpaid vendor. The truth is, the principles of justice, equity, and good conscience are at best but an uncertain guide, and not unfre- quently wear an appearance of vagueness, which, it must be confessed, is rather bewildering; to the 7 c5 student of Indian law. Indeed, it may fairly be doubted whether our Courts ought not to confine the right to a legal mortgage only to those cases in which, as in the case of the salvor, the person claiming the right could not have protected himself by an express agreement. In every other case the parties may be safely left to take the consequences of their own want of caution. I shall now treat of one or two cases in which it is sometimes thought that a lien exists. It is some- times said that a Mahomedan widow has a lien on the estate of her husband for dower due to her. The question was very fully discussed in the case of Mir Meher All v. Afussamut Amanee, and the Court, after a review of all the authorities, came to the con- clusion that the widow has no special charge on the property, but ranks pari passu with other ordinary 276 N0 LIEN ON ASSETS LECTUKE creditors. (11 W. R., p 212, see also Shah IX - Enayet Hossain v. Syud Romzan, 10 W. R., 216.) But dower, like every other debt, must be paid before the heirs are entitled to take anything, and the authorities show that a Mahomedan widow in possession of her husband's estate upon a claim of dower, has a lien upon it as against those entitled as heirs, and is entitled to the rents and profits till the claim of dower is satisfied. (See Macnaugh ten's Precedents, case 24, p. 275, Womatul Fatlma v. Mirunnissa, 9 W. R., p. 318, reported also in 8 W. R., 51.) A similar right is sometimes put forward on behalf of the creditor of a deceased Hindu, but it is now conclusively settled that a creditor has no lien on the assets in the hands of the heir, and cannot, therefore, reach any property which may have been transferred by the heir in good faith to a third party. Sir Thomas Strange, indeed, in his book on Hindu law, says, that "debts are a charge on the inheritance, and that they follow the assets into whatsoever hands it comes." (Strange's Hindu Law, Vol. I, p. 166.) And the learned author cites the very high authority of Colebrooke in support of his opinion. (Strange's Hindu Law, App., p. 282.) There is also the text of Katyayana: " If any debts exist against the father, his son shall not take possession of his effects. They must be given to his creditors." (Stokes Yubahnra Mayukha, p. 122.) Our Courts, OP A DECEASED HINDU. 277 however, have laid down a different doctrine, LECTURE IX although it may fairly be doubted if this is not one '- of the many instances in which English lawyers have unconsciously introduced the doctrines of their own law, moulded by the commercial necessities of of the country, into a system comparatively archaic, and not shaped by such economic considerations. The Sudder Dewany Adawlut, presided over by Judges not so familiar with English law, adhered to the doctrine laid down by Strange and Colebrooke. But the law has been differently interpreted in recent decisions. In the case of Zuburdust Khan v. Inderman (Agra, F. B., 71 ), the Court, in giving judgment, observed: " In our judgment the real test to be applied in deciding the issue of law raised is to be found in the answer to the question to whom does the property pass on the death of the deceased ? Does it pass immediately and entirely to his heirs, or is the normal devolution interrupted, so that the whole or a portion of the estate sufficient to discharge his debts, vests, as if by hypothecation, in the creditors, and does only the residue pass to the heir? " We can find no authority for the latter proposi- tion; nor has any other text been cited in support of it than that from Katyayana referred to by the Division Bench. Although Sir T. Strange enumer- ates debts among the charges on the inheritance, he nowhere expresses himself to the effect, that any 278 HINDU LAW. LECTURE interest in the inheritance vests in the creditor; on IX _ll the contrary, the language used by him rather shows that the whole estate of the deceased's ances- tor passes to his heirs, affecting them with a liability for the debts of the ancestor to the extent of the assets received by them. The heirs may, if they please, avoid this liability by disclaiming the estate, but into the hands of whatever volunteer it comes, the liability attaches on him; and so long as the estate remains in the hands of the heirs or any other volunteers, so long does it constitute a fund, to which the creditor is entitled to have resort for satisfaction of his claim. This is, in our opinion, the correct interpretation of the dictum that ' debts follow the assets into whatsoever hands they come.' We have examined the authorities referred to by Sir T. Strange on this point, and can find nothing in them which warrants any stronger position in favor of creditors than that which we have expressed above. The text of Katyayana may, at first sight, seem to justify the contention that the whole estate of a deceased ancestor does not pass directly to the heirs; but. that there rests in them only the resi- due after satisfaction of the debts. But this text must be read in connection with other texts of writers of hi^li authority on Ilindu law; and so reading it, we are of opinion, that the proper cons- truction of it is to hold, that it declares that the resulting benefit to the heirs from the succession JUDICIAL LIENS. 279 cannot be greater than the surplus of assets over LECTURE IX liabilities; not that the estate does not altogether '- and absolutely vest in the heirs. Numerous texts may be referred to which indicate a power in the heirs to deal with the whole estate before satisfac- tion of the debts. The very fact that they may sell it to satisfy debts shows an ability to make a good title to the whole of it. "The construction of the text of Katya} r ana in the sense contended for on behalf of the appellant is therefore untenable." (See also Annopurna Dassee v. Gunganarain Pal, 2 W R., p. 296 ; compare N. W. P, 1859, p. 23 ; Mad., S. D. A., Vol. I, p. 166.) It would seem that although a Hindu widow has, in a certain sense, a lien on the estate of her deceased husband for maintenance, the charge can- not be enforced against a purchaser for value with- out notice of the lien. At any rate the widow cannot seek to charge the estate in the hands of a purchaser without showing that there is no property of her deceased husband in the hands of his heirs. (AdJdranee Narain Kumaree v. Shona Malee, 1 I. L. R. Calc., 365; see also 8 B. L. R., 225; 9 B. L. R., 11 ; compare 2 Agra, 42; 4 Moo. Ind. App., 246; 1 AIL, 191.) I now come to judicial liens or attachments. Now an attachment under the Procedure Code may be either before or after judgment; the process being intended in both cases to guard against the 280 JUDICIAL LIENS. LECTURE alienation of the property by the defendant. It i \ '- would be beyond the range of the present lectures to discuss all the various points in connection with attachments. I shall confine myself only to the operation of an attachment under the Code. An attachment operates from the moment that the pro- cess is executed as a charge on the property, the judgment itself not having the effect of creating in this country a lien on the property of the judgment- debtor. But, in order to have the benefit of an attachment, the provisions of the Procedure Code must be carefully followed. In one case in which the notice of attachment was not fixed up in the Court-house, or in the office of the Collector, the Court thought that an alienation made by the debtor could not be avoided by the creditor. Mr. Justice Macpherson in giving judgment observed : " The objection is by no means a technical objection. The affixing the notice in the Court- house and in the office of the Collector is a far more certain means of giving information to the parties immediately interested, than in the process of reading the notice aloud on the laud or on some place adjacent to it. A man can always arrange so as to keep himself acquainted with all notices fixed up in the Court of the Judge or the Collector of a district. But there can be no certainty that he will happen to hear, or to be made acquainted with, orders which are merely read aloud on his land ALIENATION. 281 or on some place adjacent to it. In the case before LECTUBH IX us, it is not proved that the judgment-debtor was in personal possession of the lands which were the subject of attachment, and there is nothing what- ever to show or to lead to the presumption that he was acquainted with the fact of the order of attach- ment having been read aloud by the peon who was sent to attach the property. The probability of the judgment-debtors having known that the attach- ment had been issued, would have been far strong- er if the order had been fixed up in the Court- house or in the office of the Collector. " Section 240 savs that alienations after attach- j ment are to be void, if the attachment or the written order ' shall have been duly intimated and made known in manner aforesaid.' The words 'manner aforesaid' relate to the provisions of Section 239, and when two out of the three methods prescribed by that Section for intimating and making known attachments have been wholly omitted, it cannot possibly be said that the order of attachment was duly intimated and made known within the meaning of Section 240." (Inderchund Baboo v. The Agra Bank, 10 W. R., 264.) An attachment before judgment is not, according to the view taken by a Full Bench of the Calcutta High Court, an attachment which would entitle the creditor to preference in an order for distribution. The scope and object of an attachment before judg- 36 282 RIGHTS OF ATTACHING CREDITOR. LECTURE ment are merely to guard against the debtors - making away with the property pending the suit. It does not secure to the creditor priority, if any question should arise as between rival decree-holders as to the distribution of the sale proceeds of the attached property. (Sreeram Manik v. Tincowree Roy, 13 W R., F.B., p. 9.) An attachment before judgment, therefore, confers only a somewhat pre- carious right. An attachment after judgment and in execution is, however, a perfect real secu- rity. The judgment-debtor may not alienate the property, the purchaser under the execution follow- ing upon such attachment not being bound by a transfer made by the debtor subsequently to the attachment. What passes to the purchaser is, there- fore, not the rights and interests of the debtor as they stand at the time of the sale, but the rights and interests of the debtor as they stood at the time of the attachment. Section 240 of the Procedure Code has, however, received a somewhat limited construction, the Privy Council, in the case of Anund Mohun Dass against Jullodhur Shah, having held that a private alienation is void only as respects the attaching cre- ditor and those who claim under or through the attachment. (14 Moo. Ind. Ap., 543; S. C., 17 W. R., 313.) The construction suggested by one of the learned Judges in the Court below would have given the creditors of the debtor an ampler remedy, but thu point has been settled otherwise by the highest ATTACHMENT. 283 Court of Appeal. It must, however, be borne in LECTURE mind that an attachment does, to a certain extent, enure to the benefit of all the judgment-creditors. Thus, suppose A attaches property belonging to his judgment-debtor worth 5,000 rupees, and that the debt due to A is only 1,000 rupees. Now, if the debtor should sell the property to a third person before it has been attached by any other creditor, and the property should eventually be sold under an execution, the balance of the purchase money will not be paid over to the purchaser, but will be dis- tributed amons; such of the other creditors as mav o / have taken out execution prior to the order for distribution. (Sections 270 and 271, Act VIII of 1859.) In conclusion, it is necessary to observe that if an attachment has been permanently struck off, and a new attachment has become necessary, a conveyance which is executed between the two attachments will be valid. (Govindo Sing v. Mir Mushun All, S. D. A., 1855, page 244.) A question of much greater difficulty arises when the conveyance has been executed while the first attachment was subsisting. Does such a conveyance become valid by relation, or is it void against the execution-creditor and those claiming under him. In the case of Puddomoney against Roy Muthooranath Chowdry, the Privy Council observ- ed : " It seems to their Lordships that generally where the party prosecuting the decree is compelled 284 ATTACHMENT. LICTCBI to take out another execution, his title should be '- presumed to date from the second attachment. Their Lordships do not mean to lay down broadly that, in all cases in which an execution is struck off the file, such consequences must follow. The reported cases sufficiently show that in India the striking an execution proceeding off the file is an act which may admit of different interpretations according to the circumstances under which it is done, and accordingly their Lordshipy dp not desire to lay down any general rule which would govern all cases of that kind ; but they are of opinion that when, as in this case, a very long time has elapsed between the original execution and the date at which it was struck off. it should be presumed that the execution was abandoned and ceased to be operative, unless the circumstances are otherwise explained." (20 W. R., 133.) LECTURE X. Subrogation Application of rule Rights of puisne incumbrancers Rights of surety Entitled to benefit of securities held by creditor How far discharged by relinquishment of security Security nofr relinquished by payment Rule of English law Followed in India Co-debtors How far entitled to benefit of securities Purchasers of mortgagor's rights redeeming a mortgage, how far entitled to benefit of subrogation Other cases illustrative of the rule Contribution- Principle on which founded Doctrine followed in India Marshalling of securities Rule of English law Adopted by our Courts Distinc- tion between purchasers and incumbrancers Notice immaterial in the case of a mortgage. IN the last lecture I treated of the various circum- stances under which a lien is created by the opera- tion of law, independently of the assent of the parties between whom the relation is created. Li the present lecture I propose to discuss a class of securities which, although distinguishable from the class considered in the last lecture, have yet some features in common with them. I refer to cases in which a person, by whom an incumbrance is dis- charged, is sometimes allowed to stand in the place of the mortoaoree, and to avail himself of the securitv O O ' ^ in precisely the same way as if the mortgagee had assigned it to him. The doctrine of subrogation, as it is called, rests upon the plainest principles of justice and equity, 286 RIGHTS OF SURETIES. LECTURE and is recognized in almost every system of law. 2 1 You must not, however, suppose that every person who discharges the mortgage debt is entitled to the benefit of the security held by the mortgagee. As a rule, in the absence of an assignment of the security, the person by whom the debt is discharged lias no right to avail himself of it. The discharge of the debt extinguishes the security, and the doctrine of subrogation or involuntary assignment is an exception to this rule. We have seen that every person who is entitled to redeem acquires, on redemption, the right to stand in the place of the mortgagee, and that it is not necessary that he should obtain an actual assign- ment of the mortgage in order that he may avail himself of the security. (Bhekun Sing v. Din Doyal, 24 W. R., 47.) But there are other cases also in which the discharge of a debt secured by a mort- gage is followed by the same result. A surety who pays the debt due from his principal is entitled to enforce any security against the debtor possessed by the creditor. " A surety, " to use the language of Sir S. Romilly, in his argument in Crayihorne v. Swinburne, " will be entitled to every remedy which the creditor has against the principal debtor; to enforce every security and all means of payment; to stand in the place of the creditor, not only through the medium of contract, but even by means of securities entered into without the knowlcd^ RIGHTS OF SURETIES. 287 the surety; having a right to have those securities LECTURE transferred to him, though there was no stipulation for that ; and to avail himself of all those securi- ties against the debtor." In a recent case in the Calcutta High Court, the question arose whether or not a surety, by whom the debt had been paid, could proceed against the original debtor upon the instrument itself by which the debt had been created. The facts were shortly these : The plain- tiff brought a suit in the nature of an action of ejectment upon a mortgage, which had been regularly foreclosed. The defence was that, prior to the mortgage under which the plaintiff made title to the property, the debtor had borrowed money from a third person on the security of that very property, and that the defendant was his surety on that occasion. The money not having been repaid by the principal debtor, the defendant paid the debt, and the creditor, at his instance, brought an action against the debt- or on the mortgage bond; and in execution of the decree obtained by him, the property in dis- pute was sold and purchased by the defendant. In this state of facts it was contended for the plaintiff that the payment by the surety discharged the debt, and consequently extinguished the secu- rity ; and that the defendant under his purchase acquired only the rights and interests of the debtor as in an ordinary execution, and that, 288 PAYMENT BY SURETY LECTURE as the plaintiff's mortgage was prior in date to the '- defendant's purchase, the facts stated in the defence were no answer to the plaintiff's suit. This con- tention was, however, overruled by the Court, and Mr. Justice Mark by, in giving the judgment of the Court, said: "We must decide the question by analogy of the law of other countries ; and it appears to us clear, that, by the law of England and the law of Scotland, and, as far as we are aware, by the general la\v of Europe, when a surety has paid off the debt of his principal, not only all the collateral securities are transferred to the surety, but, by what is called subrogation, the right is also transferred to him to stand in the place of the original creditor, and to use against the principal debtor every remedy which the principal creditor himself could have used. It seems to us, therefore, that the law of this country may be reasonably taken to be that which has been considered equitable in other countries, namely, that the surety is not debarred from proceeding against the original debtor upon the instrument itself which created the debt, by reason of the debt having been paid by himself." ( //1'i-ra Latt Samunt v. Syud Oozeer All, 21 W. li., 347.) The English law on the subject is contained in the -Mercantile Law Amendment Act, 1856 (19 & 20 \ i<-t., c. 97), which provides, that " every person who being surety for the debt or duty of another, DOES NOT EXTINGUISH SECURITY. 289 or being liable with another for any debt or duty, LECTUBK shall pay such debt or perform such duty, shall be entitled to have assigned to him. or to a trustee for him, every judgment, specialty, or other security which shall be held by the creditor in respect of such debt or duty, whether such judgment, specialty, or other security shall or shall not be deemed at law to have been satisfied by the payment of the debt or performance of the duty ; and such person shall be entitled to stand in the place of the creditor, and to use all the remedies, and, if need be, and upon a proper indemnity, to use the name of the creditor, in any action or other proceeding at law or equity, in order to obtain from the principal debtor, or any co-security, co- contractor, or co-debtor, as the case may be, indemnification for the advances made and loss sustained by the person, who shall have so paid such debt or performed such duty; and such payment or performance so made by such surety shall not be pleadable in bar of any such action or other proceeding by him." The surety being entitled to use against the principal debtor every remedy which the creditor himself could have used, it follows that, if the principal creditor improperly deals with the securities or relinquishes them, the surety will be discharged. This is the law in England, and has been followed in this country. (Narain Govuid 37 290 ANALOGY RETWEKN SURETIES LECTURE v. Gunesh Attaram, 1 Bom., 118.) Whether the x surety will be absolutely discharged or exoner- ated only to the extent of the value of the securities relinquished by the creditor, is a question which admits of some doubt, and cannot perhaps be said to be yet settled. You will observe that the English Statute, follow- ing in this respect the law of other countries, allows to the surety, not only the benefit of any security possessed by the creditor, but^ also the benefit of any judgment which may be hold by the creditor. The same right is extended to one of several debtors who may have been obliged to pay the whole of the debt due to the creditor. The co-debtor has the same equity as the surety, and ought in justice to have the same facilities for reimbursement. It is true that the question has not been directly raised in any case in this country, except where one of several mortgagors redeems a usufructuary mortgage, when it has been held that he is entitled to retain possession of the whole estate till the mortgage- debt is discharged by the rents o *n O / and profits. It would be, however, difficult to suggest any reason why the same principle should not be extended to other cases, in which one of several joint debtors pays the whole debt, such debt being secured by a mortgage. It is true, if the mortgage is one by way of conditional sale, difficulties may arise in the way of the enforcement of it as against AND CO-DEBTOftS. 201 the other debtors; but there is no reason why the LECTUEK payment should not be regarded as a charge on the property in the nature of a simple mortgage. There are some expressions in the judgment of the Court in Degumburee Dabee v. Eshan Chimder Sen (9 W. R., 230), which would at first sight seem to show that a co-debtor cannot have the benefit of any securities held by the creditor; but the point really decided in the case was, that a co-debtor purchasing a judgment against himself and the other debtors, had no right to issue execution on the judgment for the purpose of recovering the whole amount from the other debtors. It is, however, unfortu- nate that the Court should have rested their judg- ment in great measure upon the English case of Dowbiggin v. Bourne (2 Young and Collyer, 462), which followed Copis v. Middleton (Turner and Russell, 231), in which a somewhat refined distinction was taken between securities that were merged by the judgment, and those that were available to the surety notwithstanding the judgment. The rule, however, laid down in those cases was considered to be unsatisfactory; and, as we have already seen, the English Legislature has since passed an Act for the purpose of giving increased facilities to sureties and co-debtors for reimbursement. I have already said that, as the law stands at present, one of several joint debtors cannot have the benefit of any judgment held by the 292 SUBROGATION. LECTURE creditor. The procedure of our Courts in x - matters of execution is ill adapted to the deter- mination of the various questions which must necessarily arise in sucli cases; but, as I have already pointed out, it does not, by an) 7 means, follow that the debtor will not be permitted to avail himself of any securities held by the creditor, and which the creditor might have enforced against the debtor. There are several other cases in which the law allows a person who discharges an incumbrance to stand in the place of the mortgagee. A purchaser of the debtor's equity of redemption, who pays off incumbrances on the purchased property in order to acquire a safe title, may, under certain circum- stances, use such iucumbrances as a shield against the claims of a subsequent iucumbrancer who may not have been paid oft'. (Syud Ajid Hossein v. ttajiz Anted Reza, 17 W. R., 480.) The question, how- ever, is not entirely free from difficulty, and I reserve a fuller discussion of it for the next lecture. Many other instances of subrogation will also be found in the books. Thus, in the case of Syud Mohamed Skamsal Ilasla v. Skewulc Rum, which was a suit by a reversioner to avoid a conveyance by a Hindu widow, it appearing that there was a valid mortgage upon the property for a certain sum which had been redeemed by inoiiry paid into Court by the defendant, the Court refused to make CONTRIBUTION. 293 a decree for the plaintiff, except on the condition LECTUK* T that the plaintiff should pay to the defendant the amount of the mortgage which had heen redeemed by him. (14 W. R., 315; S. C. on appeal, 22 W. 11., 409.) An analogue rule is followed when a con- veyance is set aside, the Court frequently directing that the conveyance should stand as a security for the amount actually advanced to the plaintiff, or applied to his benefit. I now come to the subject of contribution. This involves the determination of the proportions in which two or more owners of an estate, subject to a common charge, ought to contribute to its redemp- tion, or what is the same question under another aspect, the extent of the right which one of such persons, who has been compelled to discharge the common debt, has to be reimbursed by the others. This is only a branch of the general law of contri- bution, and rests on the plainest principles of justice and equity. Any other rule would leave it open to the creditor to select his own victim, and from caprice or favoritism, what ought to be a "common burden," might be turned into " a gross personal oppression." We have already seen that a mortgage debt is one and indivisible, and if several distinct parcels of land are hypothecated to the creditor, and subsequently pass to different purchasers, the credi- tor may proceed against any one of those parcels; and the only way to prevent a sale of it would be 204 APPORTIONMENT LECTURE to tender to him the whole of the mortgage debt. -1 It is but reasonable that, in such a case, the person who is compelled to discharge a common burden, should be permitted to seek indemnification from the other purchasers, and no fairer rule can be suggested than that each of the purchasers should contribute according to the value of the property purchased by him. This was laid down by the Calcutta High Court in the case of Bhoyrub Cliunder Moduk v. Nadear C/iand Pal (12 W. R., 291). It would be manifestly unjust to allow a mere accident to cast upon a particular portion of the land, and, therefore, upon the owner of that portion, a burden which was originally imposed, and which ought iu fairness, notwithstanding the proceedings of the creditor, to be laid equally on the whole, and, therefore, on all the purchasers; and, as I have already said, no proportion can be suggested which is so equitable as that of the respective values at the date of the severance. It would seem, although the point was not directly before the Court, that no personal liability is incur- red by the defendant, the plaintiff being only entitled to a charge on the portion purchased by the person from whom he seeks to be reimbursed. You will find the law similarly laid down by Story in his Equity Jurisprudence: " Cases may be easilv stated where apportionment of a common charge, or, more properly speak ing, where contribution AND CONTRIBUTION. 295 towards a common charge, seems indispensable for LECTURB tlie purposes of justice, and accordingly has been - declared by the common law in the nature of an apportionment towards the discharge of a common burden. Thus, if a man owning several acres of land is bound in a judgment or statute, or recogni- zance, operating as a lien on the land, and after- wards he alienes one acre to A, another to B, and another to C, &c. ; there, if one alienee is compelled, in order to save his land, to pay the judgment, statute, or recognizance, he will be entitled to con- tribution from the other alienees. The same principle will apply in the like case, where land descends to parceners who make partition, and then one is compelled to pay the whole charge ; contribution will lie against the other parceners. The same doctrine will apply to co-feoffees of the land, or of different parts of the land." ( 477.) And again in 484 the learned author says: " Let us suppose a case where different parcels of land are included in the same mortgage, and these different parcels are afterwards sold to different purchasers, each holding in fee and severalty the parcel sold to himself. In such case, each pur- chaser is bound to contribute to the discharge of the common burden or charge, in proportion to the value which his parcel bears to the whole included in the mortgage." ( Story's Equity Jurisprudence.) A somewhat curious case on the point is to be 296 MARSHALLING LKCTUHE found in the books: Jeetram Dutt v. Durga Dass Cliutterjee (22 W. R., 430.) It appears that the creditor, who had a charge in the nature of a simple mortgage on two properties belonging to two differ- ent persons, levied the whole of the debt from one of the debtors. The person who was obliged to repay the whole of the debt brought a suit for contribution against his co-debtors, and, in execution of the decree obtained by him, seized the property which had belonged to his co-debtor, and which formed a portion of the land on which the debt due to the principal creditor was secured. The creditor, who had in the meantime purchased the property, asked that the attachment might be withdrawn, and on the dismissal of the application deposited in Court under protest the money due to the judg- ment-creditor, which was subsequently paid aw r ay to him. He then brought a suit for the money which he had been obliged to pay under protest, but the Court was of opinion that he was not entitled to recover back the money, apparently because the judg- ment-creditor had a lien on the land which formed u portion of the property on which the debt was originally secured ; and that he was entitled, " iu respect of the security given for the original debt, to stand in the- same position as the creditor whose claim on that security had been satisfied/ 1 I now come to the doctrine of marshalling of securities, which is intimately connected with the OF SECURITIES. 297 right of subrogation, which I have already consi- LECTUBB Y dered. Whenever a person has a lien on two proper- _ ties, and another a charge only on one of such properties, the Court will compel the mortgagee whose debt is secured on two properties, to take his satisfaction in the first instance out of the estate not in mortgage to the other, provided that his rights are not in any way prejudiced, or his remedies improperly controlled. The very same result is accomplished in some systems, by allowing the mortgagee who has a mortgage only upon one estate to stand in the place of the other mortgagee, if the latter shall have taken his satisfaction out of that estate. The doctrine of marshalling rests upon the prin- ciple, that a person having two funds to resort to should not be permitted from wantonness or caprice to disappoint another who has only one fund to go upon. If, therefore, the person with a claim upon two funds elects to proceed against that to which alone the right of the other is limited, the latter will be allowed to stand in the place of the former, and to satisfy his demand out of the other fund. The result of the English and American authori- ties on the subject is thus stated by Story in his Equity Jurisprudence : " The general principle is that where one party has a lien on or interest in two funds for a debt, and another party has a lien or an interest in one only of 38 298 MARSHALLING LECTURE the funds for another debt, the latter has a right in x. - equity to compel the former to resort to the other fund in the first instance for satisfaction, if that course is necessary for the satisfaction of the claims of both parties, whenever it does not trench upon the rights or operate to the prejudice of the party entitled to the double fund." " If A has a mortgage upon two different estates for the same debt, and B has a mortgage upon only one of the estates for another debt, B has a right to throw A in the first instance for satisfaction upon the security which he, B, cannot touch, at least where it will not prejudice A's rights or improperly control his remedies." ( 633, 642, 643.) I need hardly point out that, ordinarily, a subse- quent purchaser of one of the estates has just as strong a claim as a mortgagee. There is, however, this difference between the position of a purchaser and that of an incumbrancer. In the case of a purchaser, if the purchase was made with know- ledge of the mortgage, there is no reason why, as between the purchaser and the mortgagor, the burden should be thrown in the first instance on the mortgagor; although, as I have already endea- voured to explain, the person who is compelled to pay the whole would be entitled to bring an action for contribution. A morteao-ee, however, stands O O 7 upon ;i different footing. He has a right to enforri- tin- ]>:i\ mcnt of his debt, and whether the mortg;mv OF SECU1UT1KS. to him was or was not with notice of the prior LECH-UK incumbrance, the mortgagor cannot complain with reason of any facility which may be offered to the second mortgagee by compelling the prior mortgagee to resort, in the first instance, to the estate which is not the subject of mortgage to the puisne incum- brancer. The case, in fact, is analogous to the familiar case of a mortgagor redeeming the first mortgagee. Such redemption enures to the benefit of the puisne mortgagee, and the mortgagor will not be permitted to say to him " you shall satisfy yourself only out of the equity of redemption on which alone the debt was secured." The point is a very important one, and must be carefully borne in mind. In some of the earlier English cases, you will find it laid down that marshalling could not be insisted upon by an incumbrancer with notice of the prior mortgage. (Lanoy v. Duke of Athol, 2 Atk., 4446.) The rule, however, was considered too narrow, and the distinction has since been abolished. (Gibson v. Seagrim, 20 Beav., 614; Tidd v. Lister, 10 Hare, 157.) The doctrine of marshalling has been adopted by our own Courts as a rule founded in equity and good conscience, although it may perhaps be doubted if the reservations by which the doctrine is qualified have been sufficiently attended to in some of the reported cases on the subject. In the case of Mussamut Nowa Koer v. Sheikh 300 MARSHALLING LECTURE Abdui Rohim (Sutherland, 1864, p. 374) one of j 1 the estates in mortgage having been sold under an execution levied by an ordinary creditor, the purchaser under the execution resisted the attempt of the mortgagee to enforce his security against the property which had been purchased by him, without in the first instance proceeding against the properties which still belonged to the mortgagor. The defence was allowed, and the Court, in giving judgment, observed : " The sale (i.e., the execution sale) does not release that estate from the mort- gage, but it forces the plaintiff to take measures in the first place to recover the amount due to him from the remaining estates included in his mortgage deed. If any balance remains after he has realized all which he can realize from these two remaining estates, he can then return to the third estate to recover the balance. No injustice is done to the plaintiff by requiring him to take satisfaction out of funds which are within his power for this purpose, and so placed by the deed; while, on the other hand, very great injustice might be done to other parties by allowing plaintiff to proceed against the estate which has been already sold." It is probable, although the fact does not appear from the report, that the purchaser bought without notice of the mortgage, and paid, not for the equity of redemption, but for an absolute interest in the OF SECURITIES. 301 property. Even in that case, however, it is LECTURE extremely doubtful, as I have already explained, if the purchaser under the execution could set up the defence of a bond Jide purchase for value and without notice of the incumbrance. There are other cases also in the books in which securities have been marshalled, and which you may usefully consult. (Tulsi Ram v. Munu Lall, I W. R., 353; consider Bissnnath Mookerjee v. Kisto Mo/tun Mookerjee, 1 W. R., 483; Khetoosee Cliurria v. Bany Madhub Dass, 12 W. R., 114.) LECTURE XI. Pledge of moveables Paucity of authority Contract Act Definition of pledge Validity of hypothecation of moveables Danger of fraud Distinction between a pledge and a mortgage of chattels- Power of sale Pawnee's lien extends to interest and necessary expenses Extraordinary expenses Right of pawnee to tack sub- sequent advances Rule of English law Right of pawnee to make use of pledge Degree of diligence imposed on pawnee Differences between Indian law and English and Roman law on the point Pawnor's right to accessions Right of redemption Passes to the legal representative Possessory heirs 'General and special Unpaid seller's lien May be varied Right of resales Differences between Indian and English law Lien of artificers Banker's and attorney's lien for general balance of account. I NOW propose to treat of pledges of moveable property. This class of securities is, by no menus, unimportant, although, in a country like India, the wealth of which mainly consists in agriculture, they are not so common as in commercial countries. It is for this reason that there are so few cases on the subject in the books. Pledges, however, occupy a distinct chapter in the Contract Act; and, although it cannot be said that the Legislature has dealt with every point in connection with the subject, it has certainly removed a good deal of that obscurity which must necessarily cluster round such a topic in the absence of well-defined rules. HYPOTHECATION OF MOVEABLES. 303 A pledge is defined in the Act to be the " bail- LECTUBB meut of goods for the payment of a debt, or per- formance of a promise." But, although the bailment itself is called a pledge, the bailor and bailee are severally called pawnor and pawnee, a change of phraseology for which it is somewhat difficult to account. You will have observed from the definition of a pledge, that it must be accompanied by a delivery of possession. The Act is silent on the subject of the hypothecation of moveables. I told you in the introductory lecture that, in most modern systems of law, the hypothecation of moveabies is, either not permitted at all, or is fenced in by a multitude of rules which are absolutely necessary for the prevention of fraud. We do not purchase land without examining the title-deeds, but moveables are daily transferred from one person to another^ simply on the faith of the vendor's possession ; and one of the most difficult problems which modern legislation has to solve is the reconciliation of the O interests of commerce with the prevention of fraud- ulent transfers of moveables by persons in posses- sion of them. It is, therefore, to be regretted, that the Contract Act is silent on the subject of hypo- thecation of moveables. We must not, however, infer from the silence of the Legislature that such transactions are invalid in this country, or that they may not be enforced against bond Jide purchasers 304 BONA FIDE PURCHASERS FOE VALUE. LECTUBB without notice. In the case of Deans v. Richardson (3 All., 54), the Allahabad High Court affirmed the validity of a mortgage of moveable property, although unaccompanied by delivery of possession. In giving judgment, the Court observed, "Now, without o-oino; at length into the numerous English o o o o authorities cited by the learned counsel in the course of their arguments, we may lay it down as the result of the latest rulings, that, by the common law of England, where goods are mortgaged and left in the possession of the original owner, the circumstance that they are so left is not to be held as a fraud ' per se' rendering the mortgage liable to be defeated as between the mortgagee and third parties, such as bond fide purchasers or judgment- creditors ; but when possession is left with the morti'-a^or, this is a circumstance which warrants the O O ' Court in leaving it to the jury to determine whether or not the mortgage was fraudulent and colourable, or otherwise. We are not aware that any difference prevails between the law on this point, which has heretofore been accepted in this country, and the English common law. When recently the proposed Code of Contract Law was discussed in this coun- try, the provision which the Indian Law Com- missioners proposed for the security of bond fide purchasers of chattels from persons in possession was not only denounced as at variance with the received practice of the Courts, but as uudesir- HYPOTHECATION OF MOVEABLES. 305 able in this country. We do not feel at liberty LECTURE XI to hold that the rule which has heretofore been accepted is so inequitable that we are at liberty to disregard it in our judgment. The circum- stances of each case should be closely scanned; and, where it is shown that the original dealing 7 O O is bond fide, it should be supported, notwithstand- ing there has been no delivery. In the present case no fraud other than alleged legal fraud and laches is imputed to the Bank. It is not denied that the advance was made and the security bar- gained for, it is only urged that the Bank should have taken possession at least when failure occurred in payment of the loan. The Bank was not, in our judgment, bound to take possession immediately after default was made. The machines were the means whereby the debtor earned moneys ; and it may, therefore, have been imagined that, in course of time, the debtor would be in a position to discharge his debts if indulgence were shown him. The Court, after considering the arguments urged, finds that the property in suit passed to the auction-purchaser, subject to the lien created in favour of the Bank ; and a decree will issue accordingly in favour of the Bank." This doctrine was adhered to in the subsequent case of Shijam Surder v CheytaloU, and the pledgee was allowed to enforce his security against a pur- chaser without notice. (3 All., 71.) 39 306 POWER OF SALE. LECTURE It may here be necessary to notice the distinction between a mortgage and a pledge of chattels. A mortgage, although it is subject to a condition, passes the whole title to the creditor, but a pledge passes only what English lawyers call a special property. "A mortgage is a pledge and more; for it is an absolute pledge to become an absolute interest, if not redeemed at a certain time. A pledge is a deposit of personal effects, not to be taken back but on payment of a certain sum, by express stipula- tion or the course of trade to be a lien upon them." (Jones v. Smith, 2 Ves. Jun., 378.) The mortga- gor of chattels may, therefore, be allowed to retain possession till default, but such a proceeding is open to the same objections as a hypothecation. To return. If the pawnor make default, the pawnee may sell the pledge of his own authority and without judicial process. But he is bound to give previous notice of the sale to the pawnor. The pawnee may also, at his option, bring an action against the pawnor, and retain the goods pledged to him as collateral security. The lien of the pawnee extends not only to the principal debt, but also to the interest and any necessary outlay in the preserva- tion or custody of the pledge. The language of the law, however, leaves us in some uncertainty whether the right of the pawnee to interest and necessary expenses is confined to a bare right of detention, or whether he is entitled to retain the POWER OF SALE. 307 amount out of the proceeds of the pledge. The LECTUBE Legislature could hardly have intended to confer the somewhat precarious right of a bare lien in Such cases. But it is unfortunate that it has expressed itself in language which is certainly open to misconstruction. It is hardly necessary to observe that the pawnee may obtain a sale of the pledge through judicial process, and having regard to the jealousy with which a private sale is regarded, and the possibility of further litigation, a sale through the intervention of a Court of Justice would certainly seem to be desirable in ordinary cases. In commercial trans- actions, however, this is not always either practicable or convenient; but the pawnee, as a fiduciary vendor, is bound to attend to the interests of the pawnor, and an improper sale will certainly be set aside as an abuse of the duty cast upon him. Again, you must remember that there is not the same danger of fraud in the sale of chattels as there is in the sale of land. Moveables may be appraised with sufficient accuracy for all practical purposes, but the case is very different with landed property. Besides, the exigencies of commerce mav absolutelv O tf ** require, in many cases, a prompt sale of goods; but I need hardly point out that the analogy cannot be safely extended to land. I have, however, dwelt at length on the subject in a preceding lecture, and if I recur to it, it is only to point out that a power 308 RIGHT OF TACKING. LECTURE of sale, which may be safely given to a pawnee, may XI - yet be denied to a mortgagee of imnioveable pro- perty. I omitted to mention that extraordinary expenses for the preservation of the pledge, expenses which could not have been foreseen, may be recovered by the pawnee from the pawnor. There is, however, this distinction between expenses of this class and necessary expenses. In the case of necessary expenses, the law authorizes the pawnee to retain the pledge till he is reimbursed ; while in the case of extraordinary charges, the pawnee has a right of action against the pawnor for the outlay, and it is extremely doubtful if he can add it to the amount of his lien. One learned commentator, indeed, says, that the pawnee has only a lien for necessary expenses, and that the law does not confer on him any right to be reimbursed by the pawnor over and above the right of lien. Such a right, however, I venture to think, may fairly be presumed. (See the observations of Peacock, C.J., in Ambica Devi v. Pranhuri Dass, 12 W. R., F. B., 1 ; S. C., 4 B. L. R., F. B., 77.) In the absence of any contract to that effect, the pawnee may not detain the pledge for any other debt than that for which the goods were pawned to him. The right of tacking, however, is recognized to a limited extent, the Court being bound to presume, in the absence of any evidence to the contrary, that subsecpicMit advances made to SUBSEQUENT ADVANCES. 309 the pawnor were made on the security of the LECTURE XI pledge, and the pawnor is not entitled to redeem, except on condition of repaying the original debt, together with the subsequent advances. It would seem that this qualified right of tacking may be enforced, not only against the pawnor, but also against creditors and purchasers. The rule of the English and American law on the point is thus stated by Mr. Justice Story in his Equity Jurispru- dence, 1034: " A subsequent advance made by a mortgagee or a pledgee of chattels would attach by tacking to the property in favour of such mort- gagee, when a like tacking might not be allowed in cases of real estate. Thus, for instance, in the case of a mortgage of real estate, the mortgagee cannot, as we have seen, compel the mortgagor, upon an application to redeem, to pay any debts subsequently contracted by him with, or advances made to him by, the mortgagee, unless such new debts or advances are distinctly agreed to be made upon the security of the mortgaged property. But in the case of a mortgage or pledge of chattels, the general rule, or at least the general presump- tion, seems the other way. For it has been held, that, in such a case, without any distinct proof of any contract for that purpose, the pledge may be held until the subsequent debt or advance is paid, as well as the original debt. The ground of this distinction is, that he who seeks equity must do 310 RIGHT OF PAWNEE TO USE THE PLEDGE. LECTURE equity; and the plaintiff, seeking the assistance of the Court, ought to pay all the moneys due to the creditor, as it is natural to presume that the pledgee would not have lent the new sum but upon the credit of the pledge which lie had in his hands before. The presumption may, indeed, be rebutted by circumstances; but, unless it is rebutted, it will generally, in favour of the lien, stand for verity against the pledgor himself, although not against his creditors or against subsequent purchasers." A pawnee may not ordinarily use the goods pledged to him without the consent of the pawnor; such consent, however, will be presumed, if the pledge is such that it cannot be duly preserved without being used. A horse, for instance, must be exercised, and the pawnee may ride it for that pur- pose. If, however, the pledge is of such a nature, that it will be the worse for use, as wearing apparel for instance, the pawnee may not use it himself. If the use is indifferent, a moderate use is not prohi- bited; but in no case should the pledge be exposed to extraordinary peril. On this subject the Contract Act says: "If the bailee makes any use of the goods bailed, which is not according to the conditions of the bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them." (Section 154.) But the fore- iu; rules which have been adopted in other ACCESSIONS TO THE PLEDGE. 31 systems of law may be taken to sufficiently illus- trate the conditions under which a pledge may or may not be used by the pawnee. I will next call your attention to the degree of diligence imposed by the law on the pawnee. Sec- tion 151 says:" In all cases of bailment, the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value as the goods bailed." This is a very simple rule unincumbered by the somewhat refined, if not fanciful, distinctions which we find in the Roman and English law. (See the case of Coggs v. Bernard, and the notes to that case in Smith, L. C., p. 177.) It is, however, necessary to observe, that the responsibility of the pawnee is greatly increased when he is in " mora,'' i.e., when he wrongfully withholds the pledge from the pawnor. He then becomes answerable for any loss, destruc- tion or deterioration from the time of such refusal. (Section 161.) I told you in a previous lecture that, as a rule, any accession to the pledge, or natural increase, is consi- dered to be itself pledged. A different rule would, however, seem to be laid down in the Contract Act. Section 163 of which says: "In the absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase or profit which may have accrued from 312 POSSESSORY LIENS. LECTURE the e case of a mortgagee purchasing NOVATION, 319 the equity of redemption, or a purchaser of the LECTUEB mortgaged estate paying off an incumbrauce on it. ^1 They have no application whatever to the case of a mortgagor himself buying in an incumbrauce. If the mortgagor obtains the benefit of a prior mort- gage by an assignment of the security, or by pur- chase from the mortgagee under his power of sale, the charge is absolutely extinguished, and may not be set up against the puisne incunibraucers. (See the English case of Otter v. Lord Vaux, 2 K. & J., 650.) The distinction rests upon a very intelligible ground, which I had occasion to explain in a pre- vious lecture. (See Lect. X.) A mortgage is only a security for a debt, and the mortgagor cannot be heard to complain of any increased facilities which may be offered to the subsequent incumbrancers for the recovery of their debts by an enlargement of the estate possessed by the mortgagor. A mortgagor cannot protect himself against his own incumbrances. To return. The second method by which a security comes to an end is by the discharge of the debt for which the security was given. The obligation may be discharged, not. only by an actual payment, but also by what is called novation, that is, the substi- tution of another obligation in place of the first. The substitution, however, may take place without destroying the former obligation when the novation is known as ' cumulative/ The rule of law, however, is, that in the absence of a clear expression of the 320 SALE BY PLEDGEE. LECTURE intention of the parties to the contrary, the former XII " security is not extinguished. The ordinary pre- sumption in all sucli cases is, that the benefit of a security is not waived by the acceptance of another security in its place. (See Colq. Rom. Law 1852 1855; Fisher on Mortgage, pp. 811 & 812; and Gopeebundhee v. Kalipodo Banerjee, 23 W. R., 338.) The pledgee also loses his right by renunciation, or by destruction of the pledge. The same result follows, if a third person has held the property for a period sufficient to create a prescriptive right. I may mention that a sale for revenue or any other statutory sale, which passes the property to the purchaser free of all incumbrances, does not, in reality, destroy the security of the mortgagee. It only transfers the charge from the land to the purchase money. In conclusion it is necessary to observe that a sale by the pledgee himself passes the property to the purchaser unincumbered by the security. The result is the same whether the property is sold under a decree for sale or by the mortgagee himself under his power; and, according to a recent decision of the Calcutta High Court, the benefit of the security passes to the purchaser even when the decree is simply for money, and does not expressly authorise a sale of the mortgaged estate. (Deno- bundhu Ghose v. Haran Base, 23 W. R., 186.) A mortgagee may not, in any case, sell the bare PitlORITY OF SECU1UTIES. equity of redemption. Any other rule would be LKCTUKK XII excessively harsh to the mortgagor; indeed it might be attended by the most disastrous results to him. Take, for instance, the case of a property worth Rs. 4,000, subject to a mortgage for one-half of that sum. If the mortgagee were allowed to sell the equity of redemption, which, by the hypothesis, is worth Rs. 2,000, the price which would be paid by the purchaser would, no doubt, satisfy the mort- gage debt, but the property would pass away from the mortgagor for only Rs. 2,000. It is possible that the mortgagor may become entitled by subro- gation to the security possessed by the creditor; but, as I pointed in a previous lecture, such a course would certainly lead to a perfect waste of litigation, which may be easily avoided by holding that when- ever the mortgagee sells the property on which his debt is secured, what he sells is not an undefined right like the equity of redemption, but the pledge itself unincumbered by his own security. I will now proceed to discuss the rules touching priority, one of the most intricate topics in the law of securities. Now, the general rule is, that priority is determined by the order of time. There are, however, exceptions to this rule either created by statute or recognised by the Court as founded upon those general principles of justice and equity which, in the absence of any express enactment, the Indian Courts are bound to administer. 41 322 INDIAN REGISTRATION ACT. LECTURE The first exception is that contained in Sec- XII tion 50 of the Registration Act, which, under certain circumstances, allows a registered mortgage priority over an earlier unregistered security. That Section says : " Every document of the kinds mentioned in clauses (1) and (2) of Section 18, shall, if duly registered, take effect as regards the property com- prised therein, against every unregistered document relating to the same property, and not being a decree or order, whether such unregistered document be of the same nature as the registered document or not." A similar enactment was contained in the earlier Acts. You will observe one rather remarkable omission in the law. The Act allows preference to a regis- tered instrument over an unregistered writing, where both belong to that group of instruments, the registration of which is optional. If, therefore, the puisne incuinbrance is one which the parties are bound to register, it will not be entitled to priority over an earlier unregistered security. (Hamvd Buksh v. Bindabun, 2 All., 37; Shaik Ryesatulla v. Durga Churn Pal, 24 W. R., 21.) A distinction is also made in favor of pnrol mort- gages when they a iv accompanied by possession. It is necessary to observe that, under the Indian Jstration Act, notice is immaterial. A registered instrument will be entitled to priority in every e, provided that the transfer is not merely color- able, or as it is usually called a paper, transaction. EFFECT OF NOTICE. 323 It is true the Act is silent as to the effect of notice, LECTUBB XII but it does not follow that the protection was I intended to be confined only to a mortgagee with- V o O out notice of a prior unregistered security. The con- struction put by Lord Hardwicke on the English Act has been questioned by several eminent Judges as trenching upon the policy of the registration laws, and it would certainly require strong argument to show that the Indian Legislature intended to in- troduce into this country a doctrine which would have the effect of frittering away the provisions of a most beneficent enactment. The omission from the recent Acts of the clause in the second Section of Regulation XIX of 1843, by which notice was expressly declared to be immaterial, may per- haps lend some color to the suggestion that the old doctrine embodied in the earliest Regulation on the subject was intended to be revived. It would, however, not be safe to build any argument on such an omission. It would carry me much beyond the limits which I have proposed to myself in the present lecture, to enter upon a full discussion of the question. I may, however, point out that a comparison of the successive Registration Acts down to the 19th of 1843, shows that ir, was necessary in the last statute to provide expressly that notice was immaterial in order to guard against the application of the English doctrine which had been embodied in the 324 EFFECT OF NOTICE. LECTURE original Regulation. Besides, it may fairly be asked YT T 1 >vhy lias not the Legislature in the later Acts expressly declared its intention to confine the pro- tection afforded by registration only to subsequent alienees taking without notice of a prior alienation. Such an enactment was contained in the original Regulation, and, if the doctrine was intended to be O r I revived after having been advisedly repealed by subsequent legislation, the provision would probably have been repeated in the more recent statutes. I have been induced to make the foregoing observations, because, in the case of Jivandass Kesh- avji v. Framji Nanabhai (7 Bom., 45), the Court seems to have held that the English doctrine of o notice was applicable to Act XVI of 1864, the pro- visions of which on this point are similar to those of the present statute. In that case express notice was alleged; but if you once introduce the doctrine of notice, I do not see how questions of constructive notice can be wholly shut out, and thus the protection afforded by the Registration Act would be, in great measure, if not wholly, illusory. The doctrine, how- ever, laid down by the Court in Kasliavji v. Framji was not actually necessary for the decision of the case, as the mortgage to the registered mortgagee \vas. on the face of the instrument, subject to the prior unregistered incumbrance. No question of priority, therefore, could possibly arise, as the subsequent mortgage did not purport to be a mort- SALVAGE ADVANCES. 325 gage of anything more than the bare equity of LECTUBB redemption. (Compare Kishore Bhat Gullabhai v. Jorabhai Daji, 7 Bom., A. J., 56.) To return. Another class of exceptions to the general rule, by which priority is determined by the order of time, is to be found in certain decisions of the Bombay High Court, introducing the rule of Hindu law, by which preference is, in some cases, given to a mortgage followed or accompanied by possession. The application of the doctrine is, however, confined only to a few districts in that presidency. As I told you in a preceding lecture, preference is given only to a puisne incumbrancer without notice of the prior security, and, as registra- tion at the present day serves the same purpose of publicity as tradition in ancient law, the delivery of possession affords no protection against an earlier registered security. This is probably the ground on which the application of the rule of Hindu law has been narrowed in recent decisions, for registra- tion, of itself, could not alter a rule of law, except so far as effect may be given to it by statute. (Itcharam Dyaram v. Raiji Joga, 11 Bom., 4.) Another important exception to the general rule touching the priority of securities, is recognised in favor of advances in the nature of salvage, that is advances made for the purpose of protecting a property from forfeiture or destruction. The lien of the salvor is known as a privileged lien, and upon 326 PRIORITY OF SALVOR'S LIEN. LECTURE the plainest principles of equity, takes rank above ' every other charge on the property. This rule obtains in almost every system of law, and has been admitted in this country. (See Ska Enayet Hossein v. Madan Mohun Sahun, 22 W. R., p. 411.) There is another peculiarity about salvage liens which I ought to notice. It is that among themselves they are entitled to priority in the inverse order of their dates. The general order is here reversed, and the charge which is latest in point of time is entitled to pre- ference over others earlier in date. The rule rests upon the obvious ground that, unless the last ad- vance had been made, the property could not have been preserved for the benefit of the previous lenders. It is necessary to observe that, where a payment is made to save an incumbered property from forfeiture, the person making the advance ought to take care that the facts sufficiently appear upon the face of any instrument which may be subsequently executed by the person who is benefited by the payment, as other- wise the creditor might forfeit his priority. In con- clusion I must throw out a caution that it does not follow that a person, lending money to another for the purpose of preventing a forfeiture, will be en- titled to a privileged lien, even though the fact may appear on the face of the instrument, and the money is actually applied for the purpose. There is no authority on the point, and I do not think it neces- sary to offer any opinion on it one way or the other. FUTURE ADVANCES. 327 In some systems of law, however, as I have already LECTUBB pointed out, charges of this nature are entitled to ^i preference over others earlier in date. The principle on which the priority of a mort- gage to secure future advances should be determin- ed, is a question of some nicety. The general rule is, that if, by the terms of the instrument, the mort- gagee is bound to make the advance, he would be entitled to the same priority as if the money had been advanced at the execution of the morto-ao-e DO* ( 1023, Story's Equity Jurisprudence.) If, how- ever, the terms do not bind the morto-ao-ee to make ' O o any advances, no present debt is created, and it seems that the mortgagee would be postponed in respect to any advances made by him after notice of a subse- quent incumbrance. This is now the law in England (Shaw v. Neale, 6 Ho. Lo. Cas., 581), and will pro- bably be followed in India. The only doubt that suggests itself to me is, whether in this country the mortgagee will not be postponed even in the absence of any notice in respect to advances made by him after the execution by the debtor of a mort- gage on the same property in favor of another person. There is, however, no authoritative decision on the point, and I have drawn your attention to it only for the purpose of pointing out that the English rule must not be accepted without a more careful exami- nation of the principle on which it rests than I am now able to give to the question. 328 "TACKING." LECTURE The discussion has conducted us to a topic which XII 1 is familiarly known to English lawyers as tacking, and on which it is necessary to make a few obser- vations. Now, the right of tacking was, as I told you, recognised to a certain extent in Roman law, which would not suffer the pledgor to redeem the pledge without paying to the pledgee, not only the debt for which the security was giv 7 en, but also any other claim for money in writing possessed by the creditor against the pledgor. The right ? however, could not, in any case, be exercised to the pre- judice of a third person. This qualified right, however, is not what English lawyers understand by " tacking." Building upon the maxim " where the equities are equal, the law shall prevail," the English Court of Chancery has introduced a highly artificial rule, by whi?h a mortgagee may, under certain conditions, entitle himself to pri- orit} r over an incumbrance earlier in point of date. The doctrine may be thus stated : A mort- gagee without notice, purchasing the first incum- brance, shall thereby protect his estate against an intermediate iocumbrance, although he purchased in the incumbrance after he had notice of the subsequent incumbrance. You will observe that the first mortirai>-ee has what is called the leiKil O O O iU-, and as the mortgagee purchasing in the first incumbrance, advam-ed the money without notice of the intermediate incumbrance, he has, at least, as DOCTRINE OF ENGLISH LAW. 329 strong an equity as the intermediate incumbrancer. XII Equity will not, therefore, disarm him of the advan- tage which he has secured for himself, and thus 'the equities being equal, the law shall prevail.' The origin of the doctrine is thus explained by Lord Hardwicke : " As to the equity of this Court," observes his Lordship, " that a third incumbrancer, having taken his security or mortgage without notice of the second incumbrance, and then being puisne, taking in the first incumbrance, shall squeeze out and have satisfaction before the second, the equity is certainly established in general, and was so in Marsh v. Lee, by a very solemn determina- tion by Lord Hale, who gave it the term of the ' creditor's tabula in naufragio ;' that is, the leading case. Perhaps, it might be going a good way at first; but it has been followed ever since, and I believe was rightly settled, only on this foundation, by the particular constitution of the law of this country. It could not happen in any other country but this; because the jurisdiction of law and equity is administered here in different Courts, and creates different kinds of rights in estates ; and, therefore, as Courts of Equity break in upon the common law, where necessity and conscience require it, still they allow superior force and strength to a legal title to estates; and, therefore, where there is a legal title and equity on one side, this Court never thought fit that, bv reason of a prior equity against a man 1-2 330 CONSOLIDATION. LKCTURE who had a legal title, that man should be hurt; and XI I , I this, bv reason of that force, this Court necessarily j / and rightly allows to the common law and to legal titles. But if this had happened in any other country, it could never have made a question; for, if the law and equity are administered by the same jurisdiction, the rule, qui prior est tempore potter est jure, must hold." ( Worthy v. Birkhead, 2 Ves., 571.) It is hardly necessary to add that our Courts have refused to follow the English doctrine on the subject. (11 W. R., 310.) There is, however, another maxim of the English Court of Chancery less open to objec- tion, which applies not to tacking properly speaking but to the right to a consolidation of all the securi- ties possessed by the creditor without any question as to priority. He who seeks equity must do equity, and redemption being an equitable right, the mortgagor may not redeem without on his part doing equity to the mortgagee. Thus, if the owner of two or more different estates mortoao-e them successively for dis- O O * tinct debts to the same person, the mortgagee has a right to insist that one security shall not be redeemed alone leaving him exposed to the risk of deficiency as to the others, but that the mortgagor must redeem him entirely. The right in fact claimed by the mortgagee in such cases is analogous to the right recognised by the Roman huv, and has been admitted by our Courts as resting not upon any technical SUBSEQUENT ADVANCES. 331 ground, but upon the plainest principles of justice LECTURE XII and equity. ( Vithal Mahadeo v. Daud Valad I Mahomed Hossein, 6 Bom., 90.) The doubt, how- ever, which I have expressed in respect to the applicability of these general maxims to mortgages governed by the Bengal Regulations, applies also to the present question. The Courts in the other provinces are not fettered by any positive enact- ments, and are, therefore, in a position to introduce a larger number of the doctrines of the English Court of Chancery than the Courts of Allahabad or Calcutta. The rule of English law, however, touching the consolidation of securities, however unexception- able when confined to the mortgagor or his heir, becomes of questionable propriety when extended to a purchaser, even though he should have pur- chased without notice of any other mortgage. (Ireson v. Denn, 2 Cox, 425.) The doctrine has not, however, yet received the same extension in this country, and will probably be recognised ooly in a qualified form. It would seem that debts, which are not secured by a mortgage, may not be consolidated. In pledges of moveables, however, the Legislature has recog- nised a qualified right to tack subsequent advances. There is, however, no authority for extending the right to a mortgage of land. (N. W. P., Vol. IX, p. 465; 1860, p. 122.) 332 FORFEITURE OF PRIORITY. LECTURE I shall next proceed to discuss the various ways in XII. - '- which priority may be forfeited. Now, a mortgagee forfeits his priority if he is guilty of fraud, either actual or constructive. Thus, if he should induce another by concealing his own mortgage to lend money on the security of the property pledged to him- self, he will be postponed to the subsequent incum- brancer whom he has misled. There may be no duty upon the prior mortgagee voluntarily, and without being asked, to disclose his security ; but any actual misleading, either by acts or declarations, will be followed by a forfeiture of his priority. It would take me much beyond the limits I have pro- posed to myself in this lecture, to state the various circumstances which would be sufficient to fasten upon the prior mortgagee a charge of actual or con- structive fraud. The subject is discussed in Story's Equity Jurisprudence, to which I would refer those who wish to pursue the enquiry. The following cases also may be usefully consulted. (11 W. R., 286; 5 Agra, 402.) A mortgagee may also forfeit his priority by his own laches. Thus, for instance, if the mortgagee should suffer the title-deeds to remain in the cus- tody of the mortgagor, he will, under certain cir- cumstances, be postponed to a subsequent incum- brancer who may have advanced money on the faith of the title-deeds. The earlier English autho- rities were very stringent against the mortgagee who DEEDS OF FURTHER CHARGE. 333 put the mortgagor in a position to mislead third LF.CTUBE persons ; but the rule has been considerably relaxed in more recent cases. The mere possession of the title-deeds by the second mortgagee will not give him priority. There must be some act or default on the part of the first mortgagee to have this effect. The non-possession, however, of the title-deeds, is a circumstance which the mortgagee is bound to explain. But if he can satisfy the Court that the absence of the title-deeds was reasonably accounted for by the mortgagor when he obtained his mortgage, or that he was subsequently induced to part with them, under such circumstances as to exonerate him from any serious imputation of negli- gence, he does not lose his priority. This is how the law stands upon the more recent authorities in England, and it was followed in Madras in Somasun- dara Zambiran v. Sakkarai Pattern. (4 Mad., 369.) I have already explained how the first mortgagee in possession is postponed as regards the rents and profits which he suffers the mortgagor to receive after notice of a puisne iucumbrauce. A practice obtains in this country, which is not the less objectionable because it is almost universal. When money is advanced by way of further charge, the original mortgage deed is not unfrequently can- celled, and the property pledged by a second instru- ment for the consolidated sum. Deeds of further charge are very rarely executed outside the Presi- 334 LIS TENDENS. LECTUEE dency Towns. Again, it frequently happens that when the mortgagor is unable to repay the loan, an account is taken of the moneys due to the mortea^ee f o r on his security, and a fresh bond is executed, by which the property is pledged for the original debt with the accumulated interest. The property, however, may have been intermediately pledged to a third person, and the mortgagee may be thus in danger of losing his priority. The reported cases on the subject, however, show that the Court will not presume, except on very strong grounds, that the original security was intended to be relinquished. ( Gopee Bundhoo Shantra V- Kalee Pudo Banerjee, 23 W. R., p. 338; S. D. A., 1856, p. 942; 1857, p. 1184.) The subject has been already discussed by me when treating of the extinction of securities. It must not, however, be supposed that, as against an intermediate incumbrancer, the security will be entitled to priority, except to the extent of the advances actually made before the execution of the subsequent mortgage, and where the iiiteivst is turned into principal, the agreement for com- pound interest will have no effect as against the intermediate incumbrancer. In connection with the question of priority there is one topic, on which a few words will not perhaps be thrown away. I allude to the doctrine of //.v y>fWr//.v. In consequence of the rule jwndfntr lite niltil iniu>L'L'fun\ the priority of a security LIS PENDKNS. nor cannot be affected by any iucumbrance created by i tbe mortgagor during the pendency of a suit for foreclosure or sale. This maxim is not found- ed upon any technical ground as to constructive notice, but on the broad principle, that litigation would be interminable if any of the parties to an action could create any right in favor of a third person during the pendency of a suit. As observ- ed by Lord Cranworth in Bellamy v. Saline (26 L. J., Ch., 797, N. S.): "It is scarcely correct to speak of Us pendens as affecting a purchaser through the doctrine of notice, though, undoubtedly, the language of the Courts often so describes its operation. It affects him, not because it amounts to notice, but because the law does not allow litigant parties to give to others, pending the litiga- tion, rights to the property in dispute, so as to pre- judice the opposite party. Where a litigation is pending between a plaintiff and a defendant as to the right of a particular estate, the necessities of man- kind require that the decision of the Court in the suit shall be binding, not only on the litigant parties, but also on those who derive title under them by alienations made pending the suit, whether such alienees had or had not notice of the pending proceedings. If this were not so, there could be no certainty that the litigation would ever come to an end. A mort^a^e or sale made before final o o decree to a person who had no notice of the pond- FORECLOSURE PROCEEDINGS. LKCTURB m g proceedings, would always render a new suit VT r 1 necessary, and so interminable litigation might be the consequence." (Ballajee Gunesh v. Khushalji, 11 Bom., 24; Gulabchand v. Dhondie, 11 Bom., 64; Ravji Narain v. Krishnajee Lakshman, 11 Bom., 139; and Pullukdharee v. Mohabir Sing, 23 W. R., 382.) It is only necessary to add that, under Regula- tion XVIII of 1806, the application of the mort- gagee for foreclosure would seem to be the commence- ment of the suit for the purposes of Us pendens. I had occasion to consider the question in a previous lecture, and need not, therefore, repeat what I then said (Lect. VI). It would, however, not be safe for the mortgagee to disregard the transfer altogether, and where the alienation takes place after the insti- tution of the foreclosure proceedings, but before the commencement of the regular suit by which they are almost invariably followed in Bengal, the purchaser ought to be made a party defendant, as well as the original mortiniojor. O O O Here I conclude the lectures of the term. I have endeavoured to give you a short account of the law of securities in this country. A mere bead- roll of cases, however useful to the practitioner, would have been of doubtful utility to the student, and I have, therefore, attempted to explain, as fully as I could in the compass of these lectures, the prin- ciples ou which the law is founded. 'lie kuowcth IN THE BENGAL PRESIDENCY. 337 not the law who knoweth not the reason of the LECTURE XII law ' is a saying which the student should always bear in mind, and you will pardon me if I venture to affirm what is now accepted almost as a truism that a careful study of general principles as illus- trated in different systems of law, will not be wholly useless to you when you enter upon the practical duties of the profession. It may not be given to every one of us to attain high forensic skill, but depend upon it, the culture gained by the scientific study of law is never wholly thrown away, even though it may not in every case be crowned with professional success. APPENDIX I. Since these lectures were delivered, my attention has been called to an uureported decision of Bayley and Hobhouse, JJ., in which the Calcutta High Court refused to follow the ruling of the Sudder Dewanny Adalut in Bhowany Churn Mitter's case. The facts sufficiently ap- pear from the judgment. IN THE HIGH COURT OF JUDICATURE AT FORT WILLIAM IN BENGAL. The 2Srd of September 1869. PKESENT : The Honorable Vincent Bayley and the Honorable Sir Charles Parry Hobhouse, two of the Judges of this Court. CASE No. 135 OF 1869. Regular Appeal from a decision passed by the Subordinate Judge of Zillah Dacca, dated the 15th of March 1869. SUNATUN BYSACK, Defendant (Appellant), versus KOONJO BlHAREE BYSACK, GoBINDHUN BYSACK, CHYTUNKISTO BYSACK, SADHOO CHURN BYSACK, AND GOBIND CHURN BY- SACK, Plaintiffs (Respondents). Baboo Romesh Chunder Hitter for Appellant. Baboo Onnoda Persaud Banerjee for Respondents. Bayley, J. THIS was a suit by the plaintiffs to recover from the defendant Rs. 5,600, being the principal of the overdue instalments to be paid under a certain deed of mortgage, together with Rs. 654-4 annas as interest on the said amount, by attach- ment and sale of the mortgaged properties, mentioned in the 340 APPENDIX. schedule of the plaint. The plaint stated that the cause of action, with regard to the first eight instalments, accrued on the 2nd October 1866. In regard to four others on the 9th Febru- ary 1869, and in regard to four others on the 9th February 1868 ; that a notice was served on the defendant on the 1st June 1868, requiring him to pay under the deed of mortgage, but that the defendant did not pay the money, and consequently the plaintiff prayed "that the Court may be pleased to award from the defendant and the mortgaged properties the amount claimed, together with costs and interests." The defendant's answer was to the effect, that as there was a suit already pending in the Original Side of the High Court, in which the mortgage instalment bond in question was filed, until that case is decided, a second suit on the basis of the said instalment bond could not be entertained ; that, ere this, the plaintiffs had preferred a similar claim in the Original Side of the High Court for the instalments due on the said bond, but that the suit was dismissed, hence the present suit was res adjudicata ; that the terms of the instalment bond were such as enabled the plaintiffs to bring to sale the pledged property by enforcing the said bond without the necessity of having recourse to a suit like the present, especially as the defendant never made any objection to the snm being realized by the sale of the properties mortgaged ; that the present suit was brought merely to harass the defendant ; and lastly, that the amount of interest was improperly calculated, and that all that was claimed was not in fact due. The judgment of the Lower Court is not very clear, but it evidently draws a distinction between the Courts where the English law prevails as in Calcutta, in which, under a bond, property can be sold in realization of monies due under it without the intervention of a Court, and the Mofussil Courts, where the Lower Appellate Court remarks, such property cannot be sold without the Court's intervention. It says : " It is not APPENDIX. 34,1 legal for any mortgagee to sell of himself the mortgaged property, situate within the jurisdiction of the Mofussil Courts." As to interest, the Lower Court considers that the plaintiffs claim was a just one, and the order of the Court is, " that the suit be decreed, and that the amount claimed and interest on the principal amount for the period of pendency of the suit at the rate of Rs. 6 per cent, per annum, and costs in Court, together with interest on the consolidated amount at Rs. 6, be realized from the defendant and the mortgaged properties." From this decision the defendant appeals to this Court, and the first, second, and sixth grounds of appeal may be well considered together. The first is, that the plaint discloses no cause of action. The second ground is also almost to the same effect, being that, whereas there is nothing in the plaintiffs' statement to show that the defendant was called upon to pay the money due under the mortgaged bond by the sale of any portion of the mortgaged premises and refused to carry out the proposal, the plaintiffs had no right to bring this suit. The sixth groiind is, that the contract between the parties was such as that there could be no decree against the person of the defendant as given by the Lower Court. In addition to these, there are other grounds taken in appeal to the effect, that the Lower Court was wrong in holding that, in Mofussil Courts, a claim, such as this, could not be realized without the intervention of a Court of Justice ; that the terms of the contract were sufficient to enable the plaintiff to realize what was due from the mortgaged property without bringing an action in Court ; and lastly, that the plaintiff was not entitled to the interest he claimed, or to any interest previous to the date of mortgage. It is further urged before us, although the point is not taken in the written grounds of appeal, that, if the plaintiffs are entitled to any decree at all, it must be without any costs. Now, if we read the grounds of appeal, together with the objections taken in the written statement, there appear in the 342 APPENDIX. first place two main objections to the plaintiff's suit. The first is, that pending adjudication in the Supreme Court of the suit there, this suit cannot be heard ; and the second is, that the present suit is of the character of a res adjudicata. With regard to the first point I would observe, that the same subject-matter cannot be said to be pending adjudication in the Original Side, for that is a suit on the general question of family right, and that family suit is a subject-matter separate and dis- tinct from the matter now in dispute. In regard to the second point, it is stated that a similar suit on the basis of the very instalment bond was brought before the High Court in its Original Side and dismissed, and hence the present suit on the basis of the said bond would be a res judicata. But the fact is that that suit only was, and could only be, for property, within the local jurisdiction of that Court, whereas the property now in dispute is without the jurisdiction of that Court. The subject-matters therefore of the suit there, and of the suit here, are each entirely different. Having disposed of these two objections to the suit, the next point to be considered is, whether, by the terms of the contract itself, the plaintiffs could bring this suit. Now, the terms of the contract are these. After reciting that the sums due shall carry interest, (as to which matter I shall have to remark hereafter,) the deed says " the sums shall be recoverable by a separate suit in respect thereof or by sale of a portion of the mortgaged premises sufficient to realize the amount so due." I think that, on the express terms of this contract, it was open to the plaintiffs to sue to have their right declared by a Court of Justice, to realize the money due by sale of the mortgaged property. The word "or" clearly indicates that there was the option. It is very strongly pressed on us, that there was no objection made by the defendant, and no consent was withheld as to the property being sold by a private sale or otherwise as the creditor might think best for the APPENDIX. 343 realization of his money due, and, therefore, there being no cause of action, the present suit was unnecessary, and to use the terms of the pleader, vexatious. But as I before observed, a clear option was given by the very terms of the contract to the plaintiffs to bring a suit in Court. There may have been good reasons for their instituting the present suit in Court, as the preferential course for a declaration by a Court of their right would probably be less open to future difficulties than might follow a private transfer. It is quite clear, moreover, that it was stipulated in the deed of mortgage, that a notice of a month's date was to be served upon the defendant for the payment of the money. It is also to be remarked that it was quite within the power of the de- fendant to avoid the necessity of the plaintiff's bringing an action under the specific terms of the contract by at once paying off the money claimed; but he did not do this; so far from paying it when the suit was brought by the plaintiffs in Court, he resist- ed the claim as it then stood, urging in his written statement that the amount of interest claimed was not really due. Thus, there was a clear dispute raised on the subject of the claim made by the plaintiffs, and accordingly there was thus a cause of action and the necessity of an adjudication by the Court of the point in dispute. I may, perhaps, properly notice in this place that there is a decision in page 354, S. D. Rep. of 1847, wherein it is held that a party, even under a contract, cannot realize by sale of the mortgaged properties the sums he claims, except with the intervention of a Court of Justice. Now, under the terms of this contract, it was perfectly open to the plaintiffs either to institute the suit, or (to use the terms of the contract) adopt the alternative of proceeding to sell. Of course the decision cited is clear in its terms, but it is one passed about two-and-twenty years ago, and it is not shown to us that it has been followed by a single case after its date. But be that as it may, it seems to 344 APPENDIX. me quite clear that, under the general law of contract, when parties agree to alternative remedies to be available to the creditor under their contract, it would be perfectly inequitable in a Court of justice, equity, and good conscience, to refuse to carry out the terms of the contract, imless it is shown that those terms involve direct illegality or immorality. But nothing of this kind is shown or attempted to be shown in this case. There is then an objection raised to the effect that, under the terms of the contract, the suit would not lie against the person, as also against the properties of the defendant. But in my opinion, the terms are such as quite leave it open to the plaintiffs, either to realize the monies due, from the person of the defendant, or from his properties, or from both. Baboo Onnoda Persaud Banerjee, for the plaintiffs, declares, however, that the main object of his clients is to realize the money from the properties mortgaged. The only point then that remains to be considered is that of costs. Now, as to costs, the ordinary rule is, that, where the plaintiff gets a decree, he is entitled to his costs ; but the question of costs is one, a matter of discretion. In this case, the plaintiffs mi^ht, under the alternative terms of the contract, realize the money due to them, by the sale of the properties mortgaged, without having recourse to the Court, and albeit there was an option given to him to come into Court. I am of opinion that, if they have elected the option which has put the other party, who did not oppose the realization of the money due by sale of the mortgaged property, to the trouble and expense of coming into Court, the case is one where, in a proper exercise of our discretion, no costs ought to be awarded to the plaintiffs. In this view of the case, I would on the main uphold the e that the Lower Court has passed in the case with this modification, that each party must bear his own costs, both of the Court and of this Court. APPENDIX. 345 Hobhouse, J. Mr. Justice Bayley has stated so completely the pleadings on either side, that it does not seem to me to be necessary to go over that ground again/ I shall, therefore, begin by simply stating what to my mind are the material points of the agreement between the parties, of date the 2nd March 1866, on which the contention before us hinges. I understand that, under that agreement, the defendant held himself bound to pay a certain sum of money to the plaintiffs ; that he pledged certain properties as security for the repayment of the money ; and that it was then provided that he was to repay the same by certain quarterly instalments. The conditions as to repayment by instalments form an essential part of the contention before us, and I shall, therefore, quote those conditions at length. They are these : That the defendant was to repay the principal sum of Rs. 29,380 "by quarterly instalments of Rs. 350 on the days and in the manner hereinafter mentioned, that is to say, the sum of Rs. 3,500, as being the aggregate amount of ten quarterly instalments, to be calculated from the 9th day of February 1864 up to the 8th day of August 1866 (together with such, interests as may be due under the covenant herein- after contained), to be paid and become payable immediately on the execution of these presents, and from thenceforth by quarterly instalments on the 8th day of November next; the second quarterly instalment on the 8th day of February then next following ; the third quarterly instalment on the 8th day of May then next following; the fourth quarterly instalment on the 8th day of August then next following ; and so on, by quarterly instalments on the like days in every year, until the whole amount, or the full sum of Rs. 29,380-5-3$, be paid off and liquidated." Then followed certain other conditions which do not seem to be essential to the issue before us, and then we have the following condition in the deed: "And further, that in case all four of the said quarterly instalments,- 44 346 APPENDIX. amounting to Rs. 1,400 in a year, payable by the said Sonatun Bysack to the said Koonjo Biharee Bysack, Gobindhun By sack, Chytunkisto Bysack, Sadhoo Churn Bysack, and Gobind Churn Bysack and their heirs, representatives and assignees, or any of such instalments or any part of the same shall at the close of every and each year remain in arrears and unpaid, every such year being calculated from the 9th day of February of one year to the 8th day of February of the next year, that then, and in such case, the same or so much thereof as shall remain due at the close of the year, shall carry interest at the rate of 6 per cent, per annum, and shall be recoverable by a separate suit in respect thereof, or by sale of a portion of the mortgaged premises, sufficient to realize the amount so due." These, I think, are all those points of the contract between the parties which it is essential for the purpose of this suit to have clearly before us, and 1 shall refer to these conditions of the contract as each point arises hereafter. The first contention, as I understand it, made by the appellant before us, is, in reality, that the plaintiff has no cause of action, and he rests his conten- tion, as it seems to me, mainly on these arguments, viz., that the object of the plaintiffs was to obtain the monies in dispute by sale of the properties, and that inasmuch as the plaintiffs had the power to sell those properties by the agreement between the parties, and inasmuch also as the defendant never objected to such sale, therefore there was in reality no cause of action against him. The answer, however, to this contention, seems to me to be this, viz., that, by the agreement between the parties, the plain- tills were not bound to realize their monies by the sale of the properties mortgaged, but they had the option, oil her of so realizing the monies, or else of proceeding against the, defendant, by a suit to recover the same, and it seems to me that they had ampli- cause ..(' action in the notice which was served upon the defendant to pay, and which he disregarded. It is, however, APPENDIX. 347 contended, that, so far as that notice is concerned, it was a notice under the terms of the agreement, and that it must, therefore, be considered as a notice of sale, and not a notice giving a cause of action to this suit ; but it seems to me that the notice might be used either way. By the terms of the agreement, there was a sum of Rs. 3,500 principal due to the plaintiffs on the 2nd March 1866, and by the terms of the same agreement there were certain other sums of money, being instalments on the bond, due up to the 8th February 1868. Now, the notice was in the shape of a demand upon the defendant to pay those monies, and when, therefore, the defendant neglected, or refused to pay the same, and it is admitted that he did either the one or the other, then there was clearly a cause of action to the plaintiffs to sue to recover the same. They might, of course, have used the notice simply as preparatory to the sale, but they might equally, as it seems to me, use it, as they did use it, as a cause of action on which to proceed to sue. I think, therefore, that the plaintiffs in this case had a cause of action against the defendant. The next objection in order of sequence is to the effect that, if it be admitted that the plaintiffs could sue, still they could not sue as well against the defendant personally as also against the properties mortgaged in the bond; and the grounds of this objection are that, when by the agreement between the parties the plaintiff had a specific remedy given to him, by which he could sell the properties without having recourse to the Courts, then he was not entitled unnecessarily to drag the defend- ant into Court, in order that he might sell that property by resorting to the Court, which he had power to sell without any such resort. I confess that when this argument was first made, I considered that it had very considerable force in it, but on reflection I think, that however much it may affect the case as regards the award of costs, yet it does not affect the case as regards the nature of the suit which it was within the plaintiff's competency to bring. 348 APPENDIX. The words of the contract seem to me, on acareful consideration of them, to be very plain, and go no further than this, viz., to give an alternative course of procedure to the plaintiffs. They are to the effect, that if the defendant shall fall into arrears of instalments, then the instalments shall be " recoverable by a separate suit in respect thereof or by the sale of a portion of the mortgaged premises sufficient to realize the money due," so that when the defendant fell into arrears, the plaintiffs had clearly a right under the contract, either to sue for those arrears, or else to sell the estates mortgaged, and thereby recover the arrears, and there was no restriction placed upon the kind of suit to be instituted. The contract declared simply, that the plaintiffs were entitled either to sue or^to sell, and one of the commonest forms of suit in this country is, as pointed out by Baboo Onnoda Persaud for the respondent, that of a suit on a mortgage bond, praying for the realization of the money due, and also that the amount of the said money be declared to be due upon the property mortgaged. When, too, I come to look more carefully at the prayer in the plaint itself, it seems to me that that prayer, in the words of the plaint, is.to the effect that " the Court may be pleased to award from the defendant and the mortgaged properties the amount claimed with costs and in- terests," so that the object was to have it declared, not generally that the plaintiff had a lien on the property for the repayment of the monies advanced, but particularly that the specific sum which the plaintiffs claimed from the defendant was due from the defendant, and that he and the property he had mortgaged were liable for that sum. I think, therefore, that the plaintiffs were not restricted by the terms of the agreement from suing in the form that they adopted, and that the plaint was one which ob- viously, if there was no special restriction by the agreement, might be brought in a Civil Court. The only question that remains is as to costs, and, though perhapl on this point I should have ln-cn inclined to go even APPENDIX. 349 further than my learned colleague, and to have given the defend- ant, appellant, at least his costs of this Court, yet looking to the fact that there was a contention between the parties as to the interpretation of the bond, I am on the whole content that the judgment as to costs should be as Mr. Justice Bayley has put it. I have said that I think that the plaintiffs were not prevent- ed by the terms of the bond from instituting this suit. But the plaintiffs' pleader informs us that his main object in the suit, and that is also stated in the preamble of the plaint, was to attach and sell the mortgaged properties. The plaintiffs' main object therefore was to sell the properties mortgaged. That was why they sued, but it is manifest that, by the very terms of the agree- ment, they could have gained that object by selling the mort- gaged estates at a private sale, and if they could have done so, then, when it is quite clear, that there was no obstruction or objec- tion to their doing so on the part of the defendant, although we may think that the plaintiffs are entitled to a decree, we should not, I think, be justified in giving them their costs. I quite agree with Mr. Justice Bayley that the decision of the Sudder Dewany Adawlut of 1847, at p. 354, ought not to bind us. That decision is to the effect that where a mortgagee was entitled under the contract between him and the mortgagor to sell the property mortgaged if the debts were not paid, then when the mortgagee did sell the property, and the vendee claim- ed possession after the sale, he could not obtain possession because of that policy declared by the laws of this country which made such a sale altogether inoperative. Now, it seems to me that if it were the intention of the Legislature in any instance to prevent contracts between private parties being binding in all their particulars, the Legislature would specially have said so, and would have assigned its reasons ; and in furtherence of this view I find from the very decision relied upon that wherever the Legislature interfered in contracts between parties, it has done so 350 APPENDIX. by special legislation, and for special reasons assigned ; for instance, Regulation XVII of 1806, which was between the mort- gagor and the mortgagee, requires foreclosure proceedings to be carried out through the Court. It seems to me that there is nothing in any proceeding of the Legislature which evinces any desire to interfere in matters of private contracts between parties except in special cases and for special reasons assigned, and I quite agree in the remarks to be found at p. 45 of Macpherson on Mortgagee, Edition of 1868. I am of opinion, therefore, that the plaintiffs could, under the terms of their agreement, have sold the estates mortgaged without resorting to the Court. lu this view of the case, whilst I think that we must uphold the decision of the Lower Court in substance, I also think that both in this Court and in the Court below this is a case in which each party should bear his own costs. APPENDIX II. I have not separately discussed the law administered by the High Courts in this country in the exercise of their original jurisdiction. It is, however, in great measure, moulded on the practice of the English Coiirt of Chancery, of which I have en- deavoured to give a succinct account in these lectures. The High Court, however, is a Court both of law and equity, and is therefore in a position to deal with any question arising before it according to the true, as opposed to what I may call the artificial, relations between the parties. As to the mode in which mofussil mortgages are dealt with, see Macpherson's Mortgage, Chapter XI. The following cases also, as to the right of the mortgagee to sell the bare equity of redemption under a decree for money on the covenant, may be usefully consulted : Ramlochun Sircar v. Kamini Devya, 5 B. L. R., 460 ; S. C. on Appeal, 10 B. L. R., 60 ; Brojonath Kundu Chowdhry v. Govindmony Dassee, 4 B. L. R., 83 ; and Nerenjun Mookerjee v. Opendra Narain Dev, 10 B. L. R., 57. I Js D E X. Accounts- liability of mortgagee in possession to account under Reg. XV of 1703, 237, 238 meaning of ' gross receipts ' 238 mortgagee not an assurer of continuation of previous rate of profit . 239 mortgagee not competent to create middlemen 238,239 nature of accounts -which mortgagee should keep 240 mortgagee liable, in absence of explanation, for rents exhibited in rent roll 239 verification by mortgagee 238 when, by agent, good 241, 242 when necessity for account arises L> 1 :2 duty of Court if accounts are not produced 242 presumption against mortgagee 212, 243 interest not to exceed 12 per cent. 243 Court will look to substance, and not to mere form, of agreement . 243 21' account of actual collections not excluded by zuripeshgee . . . 226 229 liability of mortgagee in possession to account how far affected by repeal of Usury Laws 231 233, iMiJ-JI'.t possession by mortgagee as lessee at fixed rent agreement excluding account of actual collections, valid .... 232 allowance for expenses of collection 2.'59 practice of Indian Courts allowance for necessary repairs 24'.' 2">1 improvements how far allowed . . -~<1. '-'"-' allowance for revenue or other payment made by mortgagee to prevent sale or forfeiture -'- occupation rent, mortgagee when chargeable with . . . .961 mesne profits and usufruct, distinction between .... _'">'.' - liability of mortgagee to account for profits received by mortgagor after notice of subsequent incumbrance liability of mortgagee after assignment, without consent of mortgagor, in English law .... See REDEMPTION. Accretions to Security right of mortgagee to right of pawnee to Acknowledgment See LIMITATIONS. *T 354 INDEX. Page. Agreement- thai on default mortgagee may sell land, void . . .92 97, upper 112 aliter in case of pawnee selling pledge 307, 308 that mortgagee in possession shall not account for rents, void under Reg. XV of 1793 227, 237 Alienation by mortgagor of his rights, valid 187 effect of clause against alienation 99 101,116,117 by mortgagor cannot affect rights of mortgagee 187 Allowances See ACCOUNTS. Bye-bil-waffa See CONDITIONAL SALE. Charge- deeds of further 333, 334 Code Napoleon- provisions of, relating to destruction or deterioration of pledge ... 45 does not permit private sale by pledgee 96 Co-debtors See REDEMPTION, SUBROGATION. Collection- expenses allowed to mortgagee in account 239 See ACCOUNTS. Condition See AGREEMENT. Conditional Sale- difference in form between mortgage by, and English mortgage . 134 136 what constitutes mortgage by 134 difference between, and sale with clause of repurchase . . . 136 139 personal liability not presumed 140 remedy of mortgagee in Bengal ordinarily confined to land . . .141 Construction of Sudder Dewanny Adalut -ib. right to immediate possession in default 170 172 See FORECLOSURE, SALE, REDEMPTION. Confusion of Security when property in pledge vests in pledgee 316 319 rule of English and Roman law 316 319 how far recognised by our Courts 318 Consolidation of Securities when and against whom allowed 330, .331 rule of English law 330 partly recognised by our Courts 331 Sec EXTINCTION OF SECURITY. Construction See CONDITIONAL SALE. SIM IT. K MOUTGAGE, USUFRUCTUARY MORTGAC.T-. INDEX. 355 Page. Continental Law- hypothecation of moveables not permitted 17 power of sale, void ib. mode of execution and distribution of sale proceeds among rival judgment-creditors (including mortgagees) Ill, 112 Contribution 293, 294 Decree See FORECLOSURE, REDEMPTION, SIMPLE MORTGAGE. Defence See PURCHASERS FOR VALUE. Deposit of Mortgage Debt time within which must be made 206 must be unconditional 204 must not be under protest 204 206 See TENDER, YEAR OP GRACE. Deposit of Title-Deeds operates as mortgage 71 72 ' equitable mortgage ' meaning of, in English law .... 75 77 usually accompanied by memorandum 78 true nature of contract implied by 78 85 Document See PAROL EVIDENCE. Dower See MAHOMEDAN LAW. English Law of Mortgage 1823 Equitable Mortgage See DEPOSIT OP TITLE-DEEDS. Execution equity of redemption saleable in 1 87 effect of sale by mortgagee 103 109 waiver by mortgagee of his rights '. . .117 mortgagee not bound to proceed against pledge ib. sale of property in, subject to mortgage 118 127 sections 270 and 271 of Civil Procedure Code ib. what passes under sale by mortgagee 127 section 259 of Act VIII of 1859 ib. See CONTINENTAL LAW, SIMPLE MORTGAGE. Extinction of Securities- consolidation 316 319 renunciation 320 sale by pledgee, or for land-revenue ib. prescription . satisfaction 319 > 32 See MERGER, NOVATION, SUBROGATION. Foreclosure- summary proceedings towards, in Bengal 159170 35G INDEX. Page. Foreclosure. (Continued.) can only take place after expiration of ' stipulated period ' . . 150 157 preliminary demand 158 Court in which application should be made ib. duty of Judge on receiving application ib, provisions of Statute mandatory, and not merely directory . . . 165 167 proceedings under Reg. XVII of 1806 mandatory, and not merely directory , 165167 regular suit for possession or declaration of title .... 168170 practice of Courts not governed by Reg. XVII of 1806 . . . 172 174 practice of English Court of Chancery 19, 20 See DEPOSIT, LIMITATIONS, NOTICE OP FORECLOSURE, ROMAN LAW, YEAR OP GRACE. Further Advance See CHARGE, PRIORITY. Guardian when notice served on, is good 163 High Court law of mortgage administered in exercise of original jurisdiction . App. I Hindu Law- early notions of pledge traceable in 28 34 tradition originally essential to validity of pledge . . . . ./'/;. gradual relaxation of rule 31 right of pledgee originally confined to bare right of detention . . ;{." :;7 foreclosure and sale, right to, gradually recognised .... 37 40 sale by judicial process 42 classification of securities by Hindu lawyers 36 priority of securities, rules regarding 42 44 rights of pledgee, if pledge is accidentally destroyed 45 no lien in, on assets of deceased debtor L'7i; 279 maintenance of female members of family how far a charge on estate . 279 Interest- higher than 12 per cent, not recoverable under Reg. XV of 179:? . . 225 no limit as to, under Act XXVIII of 1855 2:>1.L > . 1 !2 allowed on receipts by mortgagee after discharge of debt .... 254 allowed on payments made by mortgagee for necessary repairs and similar outlay t 249 See ACCOUNTS, HINDU LAW, MAHOMEDAN LAW. Judgment Creditor- possesses no lien before attachment 192 when entitled to redeem /_ Jurisdiction Sec FORECLOSURE. REDEMPTION, SIMPLE MORTGAGE. INDEX. 357 Kutkobala See CONDITIONAL SALE. Lease- mortgagee in possession under, not liable to account for actual collec- tions 232,233 persons holding under beneficial, how far entitled to redeem . . 193 See ZURIPESHGEE. Lien (considered as security arising by law). distinction between legal and judicial 265 statutory, Reg. VIII of 1819, Act VIII of 1869, and Act XI of 1859 . 266268 salvor's lien on account of payments made to prevent forfeiture . 268, 269 of co-sharer for land-revenue paid by^him ib. vendor's, and how waived 270 271 of purchaser for purchase money prematurely paid .... 273, 274 of agents and partners 274 of coparceners for necessary repairs . . . . . , . . ib. how far available against purchaser without notice .... 272, 273 Possassory See PAWN. See HINDU AND MAHOMEDAN LAW. Judicial attachment before and after judgment ...... 279 282 alienation by debtor not absolutely void 282 effect of striking off attachment 283, 284 Limitation period of, in suits by mortgagor against mortgagee for redemption . .211 effect of written acknowledgment . 212 acknowledgment when sufficient to enlarge statutory period . . 214217 acknowledgment to third party 215 effect of acknowledgment by one of several mortgagees .... 217 difference between English Statute and Indian Act ib. period of, in suits by mortgagor for surplus profits (Act XIV of 1859 and Act IX of 1871) 259 mortgagee not a trustee Ib. period of, in suits against purchasers without notice 212 period of, in suits by mortgagee for possession of mortgaged property . 1 "."> time from which period runs (Act XIV of 1859 and Act IX of 1871) 175183 permissive and adverse occupation by mortgagor ..... 176 period of, in suits in Courts established by Royal Charter . . . 183 period of, in suits for money secured on land 131. I '.'-'2 Lis pendens not based on constructive notice 334 336 application of rule 11" 35$ INDEX. Page. Mahomedan Law- early notions of pledge how far traceable in 61 53 ' rahn ' denned 51 possession originally essential to validity of pledge 53 liability of pledgee for loss or destruction of pledge .... 54, 55 gradual recognition of hypothecation 61 power of sale 54 taking of interest prohibited 57 effect of prohibition on law of security ib. bye-bil-waffas, their history and gradual recognition .... 5860 no distinction between pledges of land and goods 61 no lien for dower in, nor in favor of creditors on assets of deceased Ma- homedan 275, 276 Marshalling principle on which founded . 297 rule of English law 297, 298 recognised by our Courts 299 301 in favor of purchasers and subsequent incumbrancers .... 298 difference between position of purchaser and that of puisne incum- brancer 298, 299 Mortgage- capacity to 87, 88 different kinds of 63 proper subjects of 87 of property generally, void ib. contract of, may be verbal or in writing 64 See DEED, FORECLOSURE, LEASE, HINDU LAW, MAHOMEDAN LAW, MORTGA- GOR, MORTGAGEE, REDEMPTION, REGISTRATION. Mortgagee- Sec CONDITIONAL SALE, SIMPLE MORTGAGE, USUFRUCTUARY MORTGAGE. in possession, liability of See ACCOUNTS. not a trustee within meaning of Limitation Act 259 in possession, in what sense a trustee 249 how far bound to repair 250, 251 where not charged with deterioration 251 what improvements allowed 251, 252 allowances to See ACCOUNTS. security of, indivisible 194, 195 effect of purchase by, of portion of mortgaged property . . . 196 202 may not sell without judicial process !i:i 97 ; App. I power of sale in English law . 22 INDEX. Mortgagee. ( Continued.') remedies of, and how far they be pursued concurrently . . . 21,173 in possession, how far liable to pay land-revenue 252 suffering estate to fall into arrear, and purchasing it, does not acquire irredeemable title , 9U rights of, not affected by partition or alienation by mortgagor . . 89 92 rights of, extend to what represents original mortgage .... ib. when entitled to mesne profits 169 See ACCOUNTS, REDEMPTION. Mortgagor not liable to account 1 87 how far liable for voluntary waste 188 may sell or mortgage equity of redemption 187 rights of, liable to sale in execution ;/>. See CONDITIONAL SALE, SIMPLE MORTGAGE, USUFRUCTUARY MORTGAGE. Notice- under Indian Registration Act, immaterial 322 H2." doctrine of English law 323 constructive See Lie PENDENS. See PURCHASER, NOTICE OF FORECLOSURE. Notice of Foreclosure what it is to contain 167 must be accompanied by copy of application 105, 166 must be signed by Judge 166. }>'>' what a good service of It;.", must, if practicable, be served personally ib. on whom service is necessary 1 58 1 64 service of, on guardian of minor 163 fresh, not necessary on alienees subsequent to application for foreclosure . !*'>( year of grace counts from date of service of 206 Parol Agreement- mortgage by, valid 64 Pawn, Pawnee, Pawnor :;<'-' -:ML' Pledge See MORTGAGE, PAWN. Possessory Liens . 312314 Power of Sale- void in this country 9397 rule of English law Priority generally determined by order of time . how affected by Registration Laws 360 INDEX. Pagt. Priority. ( Continued.} effect of delivery of possession in Bombay 32f> rule of Hindu law ib. salvor's lien entitled to. irrespective of time 32") ,'!27 mortgage to secure future advances 327 /\'i-f fit lire of priority fraud, actual or constructive 332 laches ib. allowing title-deeds to remain in custody of mortgagor . . 332, 333 rule of English law followed in India ib. CHARGE, EXTINCTION OP SECURITY, WAIVER. Purchaser for value without Notice- defence of, when admitted by English Court of Chancery . 77, 78 probable explanation of origin of doctrine 272. 273 has no defence to suit founded upon real right . . . . . 121) i:!l Real- distinction between, and personal rights 29 Redemption- equity of, origin and meaning of expression iN.Vh;', recognised by Indian Courts 188,189 right of, vested in mortgagor and his representatives . . . 102. 103 partial, not allowed 1 01 one of several joint mortgagors may redeem whole ib. but only on payment of whole debt Ib. apparent exceptions to the rule 101 2 rule how far relaxed in recent cases 2(11 Registration >'<> PRIORITY, NOTICE. Representatives of Mortgagor- purchaser of whole or portion of n : property . . . ir.s ir,-_> so also a second mortgagee or attaching creditor ib. lessee holding under beneficial lease (.') 103 Roman law- short historical sketch of 7 13 clarification of securitieH in i::. II influence of, on English law '_': .! TV. Security notions of 3 C) f 9 Service INDEX. Simple Mortgage what constitutes 99 100 covenant not to alienate how far a ,/, nature of security possessed by simple mortgagee . lol how made available ,7, decree for sale and money-decree, difference between .what passes under sale by mortgagee , 103, inj persons having interest In or charge on property subsequently acquired, not concluded by decree in their absence ... 103 rights of such persons as against purchaser from mortgagee . . 101 108 mortgagee by, not bound to proceed against pledge 117 Court in which suit on, should be brought K>2, 133 See EXECUTION, PURCHASER FOR VALUE. Subrogation- rule of English law ' 286 recognised by our Courts 287, 288 rights of surety and co-debtor 288 1.".)2 purchaser of mortgagor's rights paying off incumbrance, how far entitled to benefit of security 292 See CONFUSION OF SECURITY. other cases of subrogation 292. 293 Supreme Court See HIGH COURT. Surety discharged by improper dealing with securities by principal creditor 289, 290 See SUBROGATION. Tacking explanation of origin of doctrine in English law .... 329, 330 not recognised in India .......... 330 Usufructuary Mortgage what constitutes 218222 rights of mortgagee by 222 position of mortgagee since repeal of Usury Laws See ACCOUNTS. right of mortgagee on illegal eviction by mortgagor .... 22;?. 2'2i mortgagee must ordinarily look to land ~'2'2, 22" See ZURIPESHGEE, ACCOUNTS. Tender- must be unconditional 204 Sue DEPOSIT. Title-Deeds See DEPOSIT OF , FORFEITURE OF PRIORITY. 46 362 INDEX. Page. Usury, Laws against See ACCOUNTS. their operation 221227 Vacation See YEAB OP GRACE. Vivium Vadium a kind of usufructuary mortgage 219 Warranty of title implied in mortgage 142 Welch Mortgage a variety of usuf ructurry mortgage 219 Year of Grace- mortgagor must redeem within one year from date of service of notice . 20ti practice of Allahabad Court ib. if expire on a holiday, a deposit on the first business-day is bad . . . '_M7 Zur-i-peshgee Lease their origin and history 22o '227 distinction between, and ordinary lease :.':'.:' not regarded as a separate transaction, but only as part of mortgage security '2-7 redemption of, before fixed term 22l did not exclude account of actual collections* 227 L'20 effect of repeal of Usury Laws on :.':;! -_':;:: may not be redeemed before expiration of term sufficient to exclude on basis of actual collections ..... ib. must not still be confounded with ordinary h . 24'J