FANNY SKINNER Vs. BANK OF UPPER INDIA LIMITED
LAWS(BOM)-1935-2-8
HIGH COURT OF BOMBAY
Decided on February 28,1935

FANNY SKINNER Appellant
VERSUS
BANK OF UPPER INDIA LIMITED Respondents

JUDGEMENT

Blanesburgh, J. - (1.) THIS is an appeal from a decree of the High Court at Allahabad, in a mortgagee Bank's suit to realise its security. In decreeing the suit the Court reversed a decree of the Subordinate Judge of Meerut, who had dismissed it. The suit was commenced on December 8, 1923. The mortgage had been granted, on December 8, 1911, by a Mrs. Fanny Skinner, to the Bank of Upper India, Limited. The deed was in the ordinary form of a simple mortgage with a covenant on the part of the mortgagor for payment of the mortgage debt with compound interest at the rate of seven per cent, per annum. In default of payment, the mortgagee Bank had the ordinary right of proceeding by Court sale to realise its security.
(2.) THE property comprised in the mortgage included, among other items, a one-eighth undivided share of the mortgagor in the village of Siswal and a one-tenth similar interest in the village of Badopal. THE mortgagor's brother,. the second appellant, another brother and her sister were the co-sharers with her in these villages. THE further relevant facts with reference to them will be alluded to later. THE Bank of Upper India was in 1911 still a going concern. Subsequently it went into liquidation, and the suit when brought in 1923 was -commenced by the Bank acting through its liquidator. Fanny Skinner, the mortgagor, was then still alive, but she has died since the decree of the High Court was made and her interests are now represented by the two first appellants, who are her heirs. To the suit as brought there was at first only one substantial defence put forward by Fanny Skinner. It was that she was a pardanashin lady ; that the mortgage had been procured from her by her brother (not the second appellant), whom she had entrusted with her power-of-attorney, that he had by means thereof obtained in her name from the Bank an advance of 15,000 rupees ; that no part of that advance was ever received by her; that in point of fact she had not desired to go into the transaction at all, and that there was insufficient compliance with the formalities and conditions requisite before a mortgage executed by a pardanashin lady can be enforced against her. That was, in the first instance, the only substantial defence Fanny Skinner put forward to the suit. Subsequently, and in the course of the proceedings, on her statement that the fact had only just come to the knowledge of her legal advisers, she was allowed to put forward a further defence, to the effect that the plaintiff bank was not entitled to sue by reason of the fact that there had been in 1917 an arrangement come to between the bank by that time in liquidation and its creditors by virtue of which the whole of the assets of the Bank had been transferred to a purchasing company, the Trust of India, Limited : that all interest in this mortgage debt had passed to the Trust so that the Bank had no longer any right to sue in respect of it. Accordingly the following further issue was settled for decision : Were the assets of the Upper India Bank transferred to the Trust of India, l Limited ; if so, is the plaintiff entitled to bring the present suit ? There was a separate defence put forward by the mortgagor's brother, hereinafter referred to as the second appellant. He had since the date of the mortgage acquired in severalty the entire village of Siswal. In that character he and twenty-two purchasers from him were made defendants to the suit as persons interested, subject to the mortgage, in the one-eighth undivided share of the village included therein. His separate defence was that after the date of the mortgage of her undivided interest in the two villages by Fanny Skinner there had been a partition between the co-sharers, with the result that Siswal had passed to the brothers as representing their several interests in the entirety, while the second village, Badopal, had passed to the mortgagor and her sister. Since that partition the second appellant had acquired his brother's entire interest in the village, Siswal. Accordingly, his contention was that as a result two things had happened : The first that the sisters had no longer any interest in Siswal, and the second, that he now owned the entire village in severalty and owned it free from any charge or any interest therein created by the mortgage deed in suit. If any decree was made for the realisation of the Bank's security, that decree should exclude entirely from its operation any interest whatever in the village Siswal. On that record the suit came on for trial, and the Subordinate Judge dealt with the three defences in this way : With regard to the mortgagor's defence which may be called the defence of disability, he held that the lady knew all about the transaction and that the evidence satisfied him that she was in all respects bound by it. He rejected that defence. The second defence, however, he held to be well founded. He was of opinion that the Bank had no right to sue. He came to the conclusion that under the arrangement made in 1917 all the assets of the Bank included in the sale had in truth and in fact passed to the Trust of India, and that no right of action remained in the Bank in respect of any of these assets. Accordingly, as in his judgment the mortgage debt in suit was one of the assets of the Bank included in the sale or transfer, it followed that the suit failed. He dismissed it.
(3.) WITH regard to the separate defence put forward by the second appellant, the Subordinate Judge expressed the opinion, not of course necessary to his actual decision, that it was mistaken in point of law as no charge which attached to the mortgagor's undivided interest in Siswal at the date of the mortgage could be affected by any subsequent transaction in relation to that interest to which the mortgagee Bank was no party. The Bank appealed to the High Court and there the argument was directed exclusively to the issue whether the appellant, the Bank, through its liquidator, had any right to sue. Upon that issue the High Court came to the conclusion, differing in this from the Subordinate Judge, that the right to sue in respect of this mortgage debt remained with the Bank unaffected by the arrangement just stated. No other question was raised before the High Court. The mortgagor did not there revive what has been called the disability defence. It was agreed before their Lordships that she was perfectly entitled to do so had she been so minded, although she had given no notice of cross-appeal. But the question was not raised by her at all. She confined her answer to the appeal solely to her contention that the Bank had no right of suit. With regard to the second appellant, he went one step further in the direction of abandoning his separate defence. He did not appear on the appeal at all. The question therefore whether his village Siswal was or was not any longer included in the security was never brought into discussion. In the result the High Court came to the conclusion on the only question presented to it for consideration, that the Bank through its liquidator had a clear right to sue as mortgagee, and the Court made a decree in its favour in the ordinary form, including among the property to be sold the undivided interests in both villages covered by the mortgage, a decree which so far as the undivided interest in the village Siswal is concerned may if left be final so far as the second appellant and those claiming under him are concerned, although he was not actually present before the Court when it was made. From the decree of the High Court, the mortgagor's representatives, the mortgagor having died in the meantime, presented an appeal to His Majesty in Council, and their main contention has been that the Subordinate Judge was right in his view that the Bank had no right to sue and they maintained that contention through Mr. Dunne in a very careful and interesting argument. That is the first point which their Lordships have to determine. It depends, first of all, upon the construction of the agreement, which in England would be called an agreement of reconstruction and arrangement, under and by virtue of which this particular asset was agreed to be transferred to the Trust of India, Limited, by the Bank. The agreement contains one or two provisions to which it is desirable to refer. It is dated July 16, 1917. It is a very carefully and elaborately drawn document and it sets forth in its recitals the whole history of the transaction to which it gives effect. The Bank of Upper India had in the liquidation issued to some of its creditors in respect of their claims against it certain debenture stock secured by a trust deed. The purpose of the agreement was to make it possible to come to an arrangement with the other creditors of the Bank so that by the appropriation and realisation of certain assets for their benefit, with the consent of the trustees for the debenture stock, all claims against the Bank would be got rid of, and subsequently in due course the Bank would be dissolved. The way in which all this was done was as follows : Special resolutions were passed authorising the execution by the liquidator of the Bank of the agreement of sale to the Trust of India now in question. The agreement was thereafter duly executed and no question is raised as to its complete validity according to its tenor. The only question to be determined now is its effect so far as the transfer of this particular mortgage debt from the Bank to the Trust is concerned. That the mortgage debt was included in the agreement cannot, their Lordships think, be questioned. Among the assets so included are those in paragraph 1 of the agreement as "all the book and other debts due to the Bank in connection with the said business and the full benefit of all securities for such debts. ";


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