Decided on September 12,1944

T.A. Janakumara Nainar Appellant
T.S. Samanthabadra Nainar Respondents


Patanjali Sastri, J. - (1.) THIS appeal and cross -appeal arise out of a suit to enforce an indemnity bond. The plaintiff's claim having been partly allowed and partly disallowed both parties have preferred appeals. Between 1926 and 1929 the defendant borrowed various sums of money on promissory notes from the plaintiff's father who died in February 1930; In July 1930 there was a settlement of account and a sum of Rs. 11859 -5 -0 having been found to be due from the defendant the latter assigned to the plaintiff in full satisfaction of the debt ten promissory notes of the value of Rs. 4182 -15 -0 and two mortgages of the value of Rs. 4583 -10 -0 executed in his own favour by third parties, and paid Rs. 1071 -7 -0 in cash aggregating in all to Rs. 9838, the balance -being remitted by the plaintiff. The promissory notes were endorsed and delivered and for the mortgages which were of the years 1911 and 1929 two assignment deeds were executed on 3rd July 1930. The principal and interests due under each mortgage up to the date of the assignment was calculated and specified in the deeds which were in similar terms, and the plaintiff was authorized to recover directly the above amount of principal and interest as well as the interest that will accrue hereafter according to the terms of the hypothecation deed.
(2.) AND in each deed there was a stipulation that "if in the matter of such recovery any dispute ("kalan") arises I shall make good (the loss)" The defendant also executed on 5th July 1930 so called "receipt" which was really in the nature of an indemnity bond. In this document, after reciting the settlement of account between the parties and the assignment of the promissory notes and mortgages in full satisfaction of the debt due to the plaintiff, the defendant stipulated as follows: I shall make good the loss if any dispute (kalan)' should arise owing to the renewal of the said bonds or in realizing the dues on the renewal of the said bonds I agree to pay the costs of going to Court and, the costs which might be ordered by the Court. I agree to make good the loss if any dispute (kalan) should arise in realizing the amounts on the above mentioned deeds. I hold myself responsible until the cash in respect of assigned deeds and bonds is realized. In 1935 the plaintiff sued in the Court of the District Munsif, Ranipet, to enforce the mortgage of 1929 which was assigned to him for Rs. 1409 -12 -0 and obtained a decree for Rs. 3015. This decree was, however, scaled down to Rs. 1165 on 26th October 1938 at the instance of the mortgagor who claimed the benefit of the Madras Agriculturists Relief Act, 1938. The plaintiff also brought O.S. No. 13 of 1937 in the Court of the Subordinate Judge of Vellore claiming Rs. 6409 -5 -7 on foot of the other mortgage assigned to him for Rs. 3173 -14 -0, but the said Act having come into force during the pendency of the suit and the mortgagor in this case too having claimed its benefit, a decree for Rs. 63 -13 -0 only was passed after scaling down the debt in accordance, with the provisions of that Act. The plaintiff thereupon issued a notice of demand on 7th October 1939 requiring the defendant to make good the loss by paying the difference between the amounts realised by him on the mortgages as aforesaid and the full amounts payable there under, and failing to obtain satisfaction of his claim instituted the present suit for recovery of the amount (Rs. 7833 -3 -7) with interest at six per cent, per annum from the date of demand. The defendant pleaded, inter alia, that the covenants to indemnify the plaintiff contained in the deeds of assignment and the so called receipt did not cover losses arising out of the operation of the Madras Agriculturists' Relief Act, 1938, as neither of the parties could have foreseen in 1930 the passing of such an Act by the Legislature, and that, in any event, the indemnity extended only to the sum of Rupees 4583 -10 -0 the amounts due on the two mortgages on the date of assignment, i.e., 3rd July 1930 and not to be interest accruing due subsequent to that date. He also claimed such relief as he might be found entitled to under the Madras Agriculturists Relief Act, 1938, as ho was an agriculturist within the meaning of that Act. The Court below rejected the first plea but accepted the second and passed a decree for Rs. 4583 -10 -0 with interest at 6 1/4 per cent, per annum less the amounts realised by the plaintiff on the mortgages, i.e., for Rs. 4176 -1 -1. From this decree the plaintiff has preferred App. No. 95 of 1943 claiming the balance of the amount sued for, and the defendant has preferred App. No. 108 of 1943 contending that the covenant for indemnity does not cover losses due to the new Act.
(3.) IT is obvious that the two assignment deeds and the so called receipt are parts of the same transaction and must be read together. There was some controversy as to the exact connotation of the Tamil word "kalan" so commonly used in conveyances in this part of the country. Mr. Rajah Ayyar for the plaintiff suggested that it signified a defect in title referring to Annathuri Iyer v. Ramanuja Chariar, 12 M.L.J. 411 where the word was understood in that sense, and urged that the covenant contemplated only losses due to some invalidating fact such as fraud, want of due execution, absence of consideration etc., vitiating the mortgages assigned. We are unable to accept this restricted interpretation of the covenants. It is most unlikely that the parties, while foreseeing and guarding against such contingencies, would have failed to provide against the much more obvious and probable contingency of the debtor's default in payment. "Kalan" is a word of some what loose connotation and its official translation as "dispute" is supported by Winslow's Dictionary and would seem to fit the context best. In this sense the covenant must be taken to provide for indemnification of the plaintiff against loss arising out of any dispute raised by the debtors in the matter of realising the mortgage debts assigned to him by the defendant. The contract being thus absolute in terms must, prima facie, be taken to cover losses attributable even to a change of the law which the parties could not have foreseen at the time of the contract.;

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