- (1.) THE is a special appeal by the defendant under sec. 18 of the Rajasthan High Court Ordinance, 1949, against the appellate judgment and decree of a learned Single Judge of this Court dated 22nd August, 1955.
(2.) THE dispute between the parties arises out of a suit for redemption and relates to a small sum of Rs. 415/- only, but the question of law involved is one of importance and therefore it would be proper to state briefly a few facts which have given rise to it. The plaintiff-respondents are assignees of the mortgagor, while the defendant appellant is an assignee of the mortgagees. The plaintiff's case was that one Geneshmal and his brother's widow Mst. Magi had mortgaged with Ganeshmal, Ratanraj and Chuni Lal two shops which belonged to them and which were situated at Bilara, on Chait Badi 12th, Svt. 1970 for Rs. 1451/ -. The plaintiffs purchased the equity of redemption from the original mortgagors for Rs. 2451/- on Pos Badi 3rd Svt. 2002. On the other side, the defendant had purchased the mortgagees' rights on Phalgun Sudi 11th. Svt. 2001 for Rs. 901/ -. It was averred by the plaintiffs that although the original mortgagors had mortgaged the property for Rs. 1451/-, it was apparent from the mortgage-deed itself that the loan advanced on the mortgage security was only Rs. 1036/- in cash and that Rs. 415- were added to it for teekha ankh. According to the plaintiffs the said amount of Rs. 415/-for teekha ankh was a fictitious figure and hence they were not liable to pay the same. It was prayed that a decree for redemption be given in the plaintiffs' favour on payment of Rs. 1036/- to the defendant. The defendant resisted the suit on several grounds. He did not admit that Mst. Magi was one of the mortgagers. He also contested the validity of the assignment by the original mortgagors in favour of the plaintiffs. It was further pleaded that redemption could be allowed on payment of the entire sum of Rs. 1451/- together with Rs. 637/10/6 which he had spent over the repairs of the mortgaged property. The trial court framed 5 issues and decided all of them in the plaintiffs' favour and passed a decree for redemption on payment of Rs. 1036/- by the plaintiffs to the defendant. It was found by that court that the amount of Rs. 415/- mentioned in the mortgage deed was without consideration. Aggrieved by this decree dated 23. 7. 51, the defendant went in appeal which was heard by the learned Civil Judge, Jodhpur. It was held by the appellate court that the amount of Rs. 415/- for teekha ankh was not in the nature of a penalty and that since the original mortgagers had agreed so pay the same the trial court ought to have enforced the contract. The learned Judge, therefore, allowed the appeal and madified the trial court's decree to that extent. The plaintiffs were dissatisfied with this decree dated 31. 3. 52 and therefore they filed an appeal which was heard by a learned Single Judge of this Court. He allowed the plaintiffs' appeal and restored the trial Court's decree. At the same time, he gave leave to the defendant to file a Letters Patent appeal and this is how the case has come before us. Learned counsel for the appellant has urged that although is appears from the perusal of the mortgage-deed that the mortgagees had advanced only Rs. 1036/-and Rs. 415/- were added for teakha ankh, but since the mortgagors had undertaken to redeem the mortgaged property on payment of Rs. 1451/-, the learned Single Judge ought to have considered the whole of the mortgage as one contract and should have ordered the plaintiffs to pay the full amount as stipulated by the original mortgagors. It was contended that the court ought not to have seen whether there was a good bargain or a bad bargain between the parties, that the parties had entered into a contract with a free will, that the sanctity of the contract should therefore have been maintained and since the learned Judge has committed an error in holding the mortgage inoperative to the extent of Rs. 415/-, this order should be set aside and the decree of the first appellate court should be restore Learned counsel for the respondents has on the other hand, urged in reply that on the very face of the mortgage-deed, it was apparent that there was no consideration whatsoever for adding Rs. 415/-to the mortgage amount of Rs. 1036/-, that the term teekha ankh was meaningless, that the amount of Rs. 415/- was thus a fictitious figure, that the original mortgagors might have agreed to enter this amount on account of undue influence of the creditors, but since the transaction was obviously unfair and unconscionable, the learned Judge had rightly relieved the respondents from this burden and hence the decree impugned should be maintained. The question for determination, therefore, is, as to what is the nature of the said amount of Rs. 415/- and whether the learned Single Judge has committed an error in refusing to allow it to the appellant. Before proceeding to discuss the arguments which have been advanced by learned counsel for both the parties in this Court, it may be mentioned here, that a plain reading of the mortgage-deed shows that the mortgaged property was already in possession of the original mortgagees by way of usufructuary mortgage, when the mortgage deed dated the 23rd March, 1914 (Chait Badi 12th, Svt. ,1970) was executed. It further shows that the mortgagors had admitted a loan of Rs. 900/- which, was existing by that date and which was secured by this property. To this amount, the mortgagors added Rs. 81/- for another Khata and obtained a fresh loan of Rs. 55/- on the date of the mortgage. Thus, they admitted the receipt of Rs. 1036/- and further agreed to pay Rs. 415/-for Teekha Ankh. The property was thus mortgaged for Rs. 1451/- and it was agreed between the parties that the mortgagees would not claim interest and the mortgagors would not claim rent of the property. In other words, the interest on the mortgage money and the rent of the mortgaged property were equalised. There was further contract that mortgage would not be redeemed for 31 years. Learned counsel for the appellant has very candidly conceded that it does not appear from the mortgage-deed if Rs. 415/- were advanced in cash. He has however urged that this money cannot be said to be without consideration, because there was no separate bond for that amount. According to learned counsel, there was one indivisible contract between the original parties to the mortgage and it was permissible in law for the mortgagees to demand from the mortgagors a certain amount of money over and above that which was lent to them. In support of his argument learned counsel for the appellant has referred to Lala vs. Hira Jan Berin (1 ). In that case, the plaintiff had brought a suit for redemption of a mango grove. The mortgage was of a usufructuary nature and for a sum of Rs. 100/ -. It was stipulated in the deed that mortgagee was to take fruits and fallen wood in lieu of interest and the redemption was to take place on payment of the principal sum and half as again by way of what is commonly known as "deorha". It was held following the earlier decisions of that court that: - "the provision for the payment of Deorha cannot be considered as a stipulation by way of penalty within the meaning of S. 74 of the Indian Contract Act because the Deorha could not be considered to be a sum to be paid in the case of breach of contract, not could it be considered to correspond to the provision for the payment of enhanced rate of interest payable in case of default of payment of interest at a lower rate. It was merely an undertaking on the part of the mortgagors that they would pay at the time of redemption not the principal sum only but a large sum". This view is based oh the decision in Miran Bakhsh vs. Bajrang Bahadur Singh (2), which in turn followed the decision in Webster vs. Cook (3 ). It was observed by the learned Judge that: - "the rule of law laid down in Miran Baksh vs. Bajrang Bahadur Singh has been consistently followed in Oudh for more than a quarter of a century and I am not prepared to disturb the said rules". It is clear from the above observation that the learned Judge had stuck to the view which was already prevailing in that court. We have also gone through the judgment in Miran Baksh vs. Bajrang Bahadur Singh (2) and it appears from that judgment that it is based on the view taken in Webster vs. Cook (3 ). In Webster vs. Cook (3), Webster was entitled to a life estate in a certain property subject to a jointure rent-charge of £1000 a year payable to Dame Charlotte Webster for her life and to a jointure rent charge of £500 a year payable to Dame Sarah Joanna Webster for her life and also subject to a mortgage for £23,000 and to covenants for payment of premiums on policies of insurance. By an indenture between him and the defendant the latter had advanced £1000 to the plaintiff. The plaintiff covenanted to pay to the defendant a sum of £3300 within three months after the death of Dame Charlotte Webster and in the meantime interest at the rate of 1% per annum until her death and 10% p. a. after her death until the sum was paid. The indenture contained a proviso that in case the plaintiff would pay to the defendant a sum of £1500 after one year or £1850. after 2 years together with interest and premiums, the defendant would accept the same in full discharge of £3300 and interest. It, would appear from what has been stated above that the facts of that case were very peculiar. In the first instance, the plaintiff was entitled only to a life estate in the property. Secondly, the property was already subject to payment of life annuities to other persons. It was also subject to another heavy mortgage. It was in those circumstances that the plaintiff had obtained £1000 as loan from the defendant. The defendant was to get an interest of only 1% p. a. till the death of Dame Charlotte Webster. Nobody could be sure in those circumstances how long Dame Charlotte Webster was to live and whether the plaintiff would outlive her with certainty. Thus, the mortgage-security was a very risky one and that was also one of the grounds for the mortgagee to obtain special terms from the mortgagor. Moreover, the plaintiff had sought to redeem that mortgage only after one year to save himself from the liability to pay £3300 according to his agreement and so he was held bound by the terms of the contract by the learned Judge. It would not be out of place to point out here that the law in England has developed by precedents which in themselves have been influenced by social and economic conditions prevailing in that country at a particular period of time. The economic and social conditions and traditions of this country have-been different in many respects and if the English precedents are applied without keeping the above conditions in view, a serious injustice is likely to creep in. Before the abolition of the usury laws by the Act of 1854, the court's jurisdiction in that country to intervene in mortgage contracts was very wide. It was generally thought that a mortgagee was in a position to dominate over the will of a mortgagor and therefore the courts of equity used to scrutinize the terms of redemption jealously. The position of law prevailing at the time has been stated in Halsbury's Laws of England, Second Edition, page 308 as follows : - "as a general rule, any device by which a mortgage or is made to pay on redemption more than principal, interest, and costs is void". This observation is based on the decision in Booth vs. Salvation Army Building Association (1897), 14 T. L. R. 3. In Mainland vs. Upjohn (4) referred to by learned counsel for the appellant himself, the views of the court prevailing before the abolition of usury laws by the Act of 1854 were expressed in the following language: - "before that time it was well settled that collateral advantages could not be insisted upon by a mortgagee. There are many ways in which the equity to redeem was defended by stringent provisions laid down by the Court which created that equity. Among them there was first of all this: - that the amount stated in the mortgage deed to be advanced was never conclusive. The mortgagor, or anybody claiming under him, was always at liberty to shew, if he could, that that amount bad not been actually all advanced. Another was this : a stipulation capitalizing interest, turning it into principal and charging interest upon it, however formally expressed, was not allowed to prevail. A stipulation that a mortgagee if he entered should be paid a Commission for receiving the rents was always defeated; and it is not now, according to the latest authorities, allowed to prevail; and further a stipulation that the interest should be paid at one rate, but that if not paid at that day, the rate should be increased, always was held to be void. These are the rules of equity which in the jurisdiction which has been sometimes called the "paternal jurisdiction of courts of Equity, were forced upon a mortgagee, whatever contract he chose to make with the mortgagor; he Court did interfere with his contract, interfered in all the respects I have mentioned, and, so to speak, altered the contract between the mortgagor and mortgagee by disallowing these advantages for which the mortgagee had stipulated " After 1854, there came a change and the mortgage contracts between the pa ties were held binding if the stipulation in favour of the mortgagee was not unfair and unconscionable or not inconsistent or repugnant to the right of redemption. It will be discussed at a later stage whether the contract between the parties in the present case was unfair and unconscionable. Before coming to that point it may be observed that in a State like Rajasthan, where the incidence of illiteracy is very high and where there is a wide gulf in the social conditions and intelligence of the money lenders and the debtors, the legislature has in its wisdom enacted relief Acts from time to time to save the debtors from usury. At the time when the present suit was filed the Marwar Relief of Indebtedness Act 1941 was in force and no court in Marwar could allow to a creditor interest at the rate of 50% even if it came to the conclusion that the creditor had exercised no undue influence over the debtor. Even at present the Usurious Loans Act is in force in this State and an interest above the maximum permissible under that law cannot be granted by courts. Learned counsel has next referred to Mainland vs. Upjohn (4 ). In that case one Mr. William Douglas who had for many years carried on an extensive business as a builder had agreed with the defendant Mr. Arthur Ritchie Upjohn who advanced to him a loan of £3600 on the security of 3 houses. In other words, £1200 were to be advanced on the security of each of the there houses. It was further agreed that the mortgagor would pay to the mortgagee a commission at 5% on each advance of £1200. The mortgagor was also to pay interest on the loan at 6% p. a. The main questions for decision in that case was, whether in taking the account in the action as between the mortgagor and mortgagee, the mortgagee should be allowed the commission which had been deducted by him on making the various advances. It was held, following an earlier decision in Potter vs. Edwards (26 L. J. (Ch.) 468) that the sums actually deducted for commission at the time of making the advances should be allowed. It may be pointed out that in Potter vs. Edwards a mortgage for £1000 was executed, but only £700, were advanced. It was contended by the mortgagee that he had agreed to advance only £700, because of the unsatisfactory nature of the security and that he had kept the remaining £300 as a bonus for the risk and hazard. It was found by the learned Judge that the risky nature of the mortgagee-security was established. It was therefore held that on a loan of money on a risky security it was legitimate between the mortgagor and mortgagee to deduct from the actual amount a certain amount as bonus It was also found in the above case that the parties were on equal terms; that they had deliberately entered into the bargain and there was no improper pressure, unfair dealing or undue influence on the part of the mortgagee. It is clear that the decision in Mainland vs. Upjohn (4) is not applicable to the present case, because this is not a case of deduction of commission or bonus and the mortgagee security is not of a risky nature as would be shown hereafter. The next case relied upon by the appellant's learned counsel is Biggs vs. Hoddinott (5 ). That was a case of a mortgage of a hotel to a brewer. There was a covenant by the mortgagors that during continuance of a mortgage-security they would deal exclusively with the mortgagee for all beer and malt liquors sold on the mortgaged premises. The mortgage-deed also contained a stipulation that the loan could not be called in for 5 years. The mortgagors having ceased to purchase beer from the mortgagee, the latter moved for an injunction against the mortgagors to restrain them from the breach of the covenant. The mortgagors also claimed redemption before the expiration of the 5 years. It was held that; - "the mortgagee may stipulate for a collateral advantage at the time and as a term of the advance provided the equity of redemption is not thereby fettered and the bargain is a fair and reasonable one, entered into between the parties while on equal terms, without any improper pressure, unfair dealing, or undue influence". It is obvious that that was a case about a stipulation for a collateral advantage and it has little bearing on the present case. The last case relied upon by appellant's learned counsel is Sontley vs. Wilde (6 ). In that case a lady, who had a lease of which there were 10 years to run subject to a rent and covenants, wanted to carry a theatre and so she borrowed a sum of £2000 for the purpose. She agreed to pay not only interest, but also one third profit rents. It was found by the learned Judge that the security of the lease was absolutely insufficient and a security of that sort unless it was kept up for 10 years was very shaky. It was also thought that if the mortgagor's business failed, the mortgagee was likely to lose his money. Taking these matters into consideration it was held, following Biggs vs. Hoddinott (5), that: - "a mortgagee may stipulate in his mortgage deed for a collateral advantage for himself beyond the repayment of the sum advanced and interest, and may enforce the bargain against his mortgagor, provided it is not unconscionable or oppressive. . . . . . . . . . . . It is clear that Sontley's case (6) is also a case of a collateral benefit which was allowed, since the mortgage-security was found to be very shaky and it was also found that the parties were on equal terms and the transaction was not unfair or unconscionable. In the present case it is clear from the mortgage-deed itself that the shops were already in possession of the mortgagees as security for an earlier loan of Rs. 900/ -. From the accounts Ex. P. W. 4 which have been produced by the defendant-appellant it further appears that out of the said sum of Rs. 900/-only 650/- were advanced in cash and Rs. 250/- were added for improvements of the mortgaged property. It is further apparent from the mortgage-deed dated the 23rd March, 1914, that to the said amount of Rs. 900/- Rs. 81/- were added on account of another Khata and there was a fresh loan of only Rs 55/ -. It is thus clear that the only additional advantage which the mortgagors received at the time of the execution of this document was a loan of a petty sum of Rs 55/ -. The very fact that they were required to pay an additional sum of Rs 415/- at the time of the redemption shows that this term was manifestly unfair and unconscionable and the mortgagors could not possibly agree to such a term without some sort of undue influence having been brought to bear upon them by the mortgagees There is nothing to show on record that the mortgage security was of a risky nature. It appears from the mortgage-deed itself that besides the two shops there were other apartments also, no less than 9 in number, which were mortgaged. The mortgagees had agreed that the rent of the mortgaged property would be received by them in lieu of interest. When the profits of the mortgaged property and the interest on the loan advanced were equalised, it apparently means that the mortgaged property was capable of fetching rent equal to the reasonable interest of the money advanced to the mortgagors. The respondents have purchased the equity of redemption for Rs 2451/- and this by itself shows that the mortgaged property was of a much greater value than the sum which was advanced on its security. Except for bare insistence upon the enforcement of the terms of the contract, learned counsel for the appellant has not been able to show any justification whatsoever for including the said amount of Rs. 415/ -.
(3.) LEARNED counsel for the appellant has urged in the end that the respondents had not pleaded that the appellant had brought undue influence on the original mortgagors or that the transaction was unfair or unconscionable, and under these circumstances this plea should not be taken into consideration. This argument is also untenable, because the respondents have filed this suit mainly with the purpose of getting themselves relieved of the burden of paying Rs. 415/- of Teekha Ankh. It is true that the plaint is not happily drafted, but it would not be fair to put too much stress on the frame of the pleading in a muffasil court and that too in the year 1947. Sec. 16 (3) of the Indian Contract Act runs as follows: - "where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other". It is not disputed in the present case that the original mortgagors and the mortgagees already stood in the position of a debtor and a creditor. A perusal of the mortgage deed on the very face of it shows that the creditors in that case were in a position to dominate the will of the debtors and that the contract was patently and manifestly oppressive, unfair and unconscionable, because no sensible man would agree to pay Rs. 415/-more while obtaining a loan of Rs. 55/-only. A very heavy burden, therefore, lay on the appellant to prove that this was a fair transaction. The mortgagee had already included the money which they had spent on improvements of the mortgaged property by that date. They had also got their full interest on the money advanced by them. All the courts below have held that the mortgagees have not spent anything further on the improvements of the mortgaged property. The mortgage-security was not of a risky nature in any manner. Under these circumstances, the appellant cannot claim the said amount of Rs. 415/-simply because it is embodied in the mortgage deed. In the absence of any evidence on the part of the appellant the trial court and the learned Single Judge were not wrong in holding that there was no consideration for this amount and that this term seems to have been obtained by the mortgagees on account of undue influence. It may also be observed here that sec. 60 and 62 of the Transfer of Property Act lay down the right of a mortgagor to redeem the mortgaged property. Sec. 62 provides for the right of a usufructuary mortgagor to recover possession and sec. 60 of the said Act provides his right to redeem other kinds of mortgages generally. According to sec. 60 the mortgagor has a right to redeem the mortgaged property "after the principal amount has become due" on demand or tender at a proper time and place of the mortgage money. It is clear from the bare 1anguage of this section that the right to redeem accrues as soon as the payment of the principal money becomes due. It is significant that the word used in sec. 60 is the "principal money". The "principal money" obviously means the actual principal amount of loan advanced by the mortgagee. Then it further appears from the language of the section that what the mortgagor is required to pay is the mortgage money. "mortgage money" is defined in sec. 58 of the Transfer of Property Act as "the principal money and interest of which payment is secured for the time being". The provisions of sec. 62 also show that in the case of usufructuary mortgage the mortgagor has a right to recover possession of the mortgaged property where the mortgagee is authorised to pay himself the mortgage money from the rents and profits of the property when such money is paid. It further provides that if the mortgagee is authorised to pay himself from such rent and profits or any part thereof a part only of the mortgage money, then the mortgagor has a right to recover possession when the term, if any, prescribed for the payment of money has expired and the mortgagor pays or tenders to the mortgagee the mortgage money or balance thereof or deposits the same in the Court Thus, in sec. 62 also, the word used is "mortgage money". It has already been explained above that "mortgage money" means only "principal money and interest". Therefore unless the appellant was able to show that the sum of Rs 415/-was included for interest, he cannot insist on its payment. The learned Single Judge has taken a very fair and just view in relieving the respondents from payment of this amount. There is no force in this appeal and it is dismissed with costs. .;