NATHU MAL Vs. RAMAN MAL

JUDGEMENT

(1.) In this appeal their Lordships are called upon to construe a mortgage instrument which may be fairly described as a primitive piece of conveyancing, the language of which is sadly lacking in clearness and precision. It is dated 15 May 1919. The parcels which constitute the security for the loan consisted of two houses and a shop in Amritsar, and two shops in the city of Lahore. The two shops in Lahore were subject to two mortgages in favour of one Raman Mal dated respectively 26 February 1906, and 9 March 1918, while the whole of the abovementioned property (including the two shops in Lahore was subject to a mortgage in favour of one Lala Balla Mal dated 5 May 1917. It was for the purpose (inter alia) of paying off this last mentioned mortgage that a sum of Rs. 13,500 was borrowed from the appellant Nathu Mal, and the repayment thereof was secured by the deed of 15 May 1919. The security was for a fixed term of two years and carried interest at a rate equivalent to 7? per cent, per annum. After the two years had expired the rate rose to the equivalent of 9 per cent, per annum. The security was expressed to be subject to Raman Mal's mortgage of 26 February 1906, over the two shops at Lahore. The mortgagors were described as being "Ram Das for myself and as a guardian of Kishan Dayal minor, my adopted son aged 14 years and Bal Kishan". The deed contains (according to the translation in the record) at the end of a lengthy clause (dealing with the absence of any encumbrances beyond the said mortgage of Ram Das, with the rights of the mortgagee against the mortgagors personally, and his right on enforcing his security to interest at 9 per cent, per annum) the following words : If I sell any house out of the property I will pay the entire sale proceeds thereof to the mortgagee and will not take credit for interest on the amount paid. In other words we will not deduct interest.

(2.) Nathu Mal duly advanced the Rs.13,500, and Lala Balla Mal was duly paid off. More than two years later Earn Das and Bal Kishan purported to sell the two shops in Lahore to Raman Mal for the sum of Rs. 13,000, and they executed in his favour a sale deed thereof dated 22 October, 1921. The sale deed recites Raman Mal's two mortgages, that a sum of Rs. 4,215 is due for principal and interest thereunder, and that no other encumbrance exists on the property. It further recites that the price of Rs. 13,000 has been paid, as to Rs. 500 by deposit paid on 23 September 1921, as to Rs. 4,215 by deduction for principal and interest due on the two mortgages, and as to the balance Rs. 8,285 in currency notes. It would appear that subsequently some Rs. 7,000 were paid to Nathu Mal on account of his mortgage debt, but it has been found as a fact and cannot now be disputed that Nathu Mal was unaware of the sale to Raman Mal and never consented thereto. On 12 July 1928, Nathu Mal brought the present suit to enforce his mortgage security. He joined as defendants the mortgagors and Raman Mal. Subsequently on Ram Das becoming insolvent the Official Receiver was added as a defendant, but he did not appear. Raman Mal was joined as a mortgagee holding a prior mortgage on the two shops at Lahore.

(3.) At the trial before the Senior Subordinate Judge, both, Ram Das in his evidence, and Raman Mal by his counsel, contended that the sale to Raman Mal had been made with the express authority and consent of Nathu Mal. Ram Das testified that "he was telling me to sell the Lahore property and pay him off". The Judge disbelieved this story. In the result the Judge made a preliminary decree for sale (dated 22nd December 1928), which fixed 22 February, 1929, as the date for redemption. It declared that the amount due to Nathu Mal for principal, interest and costs calculated up to that date was Rs. 10,852-14-3, and that such amount should carry interest at 6 per cent, per annum until realization; that the amount due to Raman Mal on his prior mortgage was Rs.1,900 and on his subsequent mortgage was Rs. 3,533-4-0 calculated up to 22nd February 1929. There then followed the usual provisions contained in a preliminary decree, but framed so as to provide for the sale of the Lahore properties only in the event of the proceeds of sale of the Amritsar properties proving insufficient to answer the claims of Nathu Mal, and so as to preserve the priority of Raman Mal's prior mortgage. No redemption having taken place on or before the appointed day, a final decree for sale was passed on 25 February 1929.