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Suit No.68 of 1958, decided on 25th March, 1964.
S. 25(1)(h) Collateral" security‑Must co‑exist with original security taken earlier in point of time‑Provision, however, does not prohibit taking of security by way of deposit of title‑deeds for advance already made and secured in accordance with clauses (a) to (g) of S. 25(1) where security so taken has already disappeared at time of taking security by way of deposit of title deeds.
Ebrahim Azeem v. William Dickson Cruickshand 16 S W R 203 ref.
S. 17‑Deposit of title -deeds‑Letter confirming such deposit‑Held, to be merely a memorandum not requiring registration.
Official Assignee v. Sind Provincial Co‑operative Bank Ltd. A I R 1943 Sind 36; Rachpal v. Bhagwandas A I R 1950 S C 272 ; Sundarachariar v. Narayana Ayyar A I R 1931 P C 36 and National Bank of Pakistan v. Fasihuddin and others P L D 1964 Kar. 92 ref.
Nurul Arifin for Plaintiff.
Iqbal Kazi for Defendants Nos. 1 and 2.
Mahmud Hussain for Defendants Nos. 3 to 7.
Dates of hearing: 9th, 10th, 16th, 17th and 21st January 1904.
The present suit which is for the recovery of Rs. 303800/4/9 arises out of a cash credit facility with the limit of Rs. 5 lacs, given to defendant No. 2 for himself and on behalf of defendant No. 1. Defendant No. 2 executed the agreement Exh. 51, with the National Bank of Pakistan to this effect. Defendant No. 2 who was at that time doing business for himself and on behalf of defendant No. 1 in hides, skins and wool processed in his godown, pledged all his goods with the bank. Letters pledging the goods Exhs. 56 to 71, dated 2nd April 1951 to 29th September 1951, were executed. Pursuant to this cash credit facility defendant No. 2, drew from 6th March 1951, the day on which this facility was given, up to 17th June 1952, Rs. 1,24,823/7/4 from the National Bank of Pakistan.
2. Defendant No. 2 had also been granted a cash credit facility by the Habib Bank and he had drawn from that Bank certain sums of money which, with interest, came to Rs. 73,237‑15‑7. Defendant No. 2 had equitably mortgaged his property, namely, Iqbal Manzil (Plot No. 670 Jamshed Quarters, Karachi) by deposing its title deeds with that Bank.
3. Defendant No. 2, in the meantime, with the permission of the plaintiffs exported the goods that were pledged with them. The plaintiffs were consequently left without any security for the amount that was advanced by them to defendant No. 2. As in, those circumstances the defendant desired to deal with one bank instead of two he wrote a letter on 17th June 1952, Exh. 118, to the plaintiffs requesting them to pay off his debt to Habib Bank and to take over the title deeds in respect of Iqbal Manzil that had been deposited with the Habib Bank. The plaintiffs agreed to the proposal and paid Rs. 73,237/15/7 to Habib Bank by a cheque and debited that amount to the account of defendant No. 2. They took a pronote from defendant No. 2 for Rs. 2,50,000/‑ on the same day. That pronote is Exh. 53. The cheque by which they paid Rs. 73,237/15/7 to Habib Bank is Exh. 36. The title deeds of Iqbal Manzil which were with Habib Bank were transferred on the ‑same day to the plaintiffs. The letter of deposit of title deeds with the plaintiffs is Exh. 54. He also executed a power of attorney in favour of the plaintiffs to sell Iqbal Manzil if and when it became necessary.
4. Defendant No. 2 drew more money from the plaintiffs after he had executed a pronote for Rs. 2,50,000. As the defendants did not repay the debt of the plaintiffs, this suit was filed against them on the 13th of May 1958. This, suit, as has been stated above, is for the recovery of Rs. 3,03,800‑4‑9 including interest on the‑ principal amount at the rate of 6 Y. up to the date of the institution. It is founded upon the statement of account which was filed with the plaint.
5. Fahim & Company, defendant No, 1, which is a firm, was reconstituted and its present members, who are the wife (defendant No. 3) and the children (defendants Nos. 4 to 7) of defendant No. 2, were taken as partners, Defendants 4 to 7 were minors, consequently they were admitted to the benefits of the partnership only.
6. Defendants 3 to 7 have denied the claim of the plaintiffs and have pleaded total ignorance of the transaction between defendant No. 2 and the plaintiffs. Defendants 4 to 7 have further stated that being minors they were only admitted to the benefits of the partnership and as such they were not to be liable for the claim of the plaintiffs. Defendant No. 2 however, admitted all that has been said in the plaint except only that the claim of the plaintiffs as set out in the plaint is not admitted by him. He has admitted that the amount due from him up to 17th June 1952 was Rs. 1,97,638; 10‑11. He has also admitted that he had drawn cheques for Rs. 140‑‑10‑0, Rs. 1,325‑9‑0, Rs. 2,000 and Rs. 5,000 after 17th June 1952. He has admitted the execution of the documents but has alleged that he had don so owing to the undue influence that was exercised on him. He has pleaded that the interest was unconscionable and contrary to the prevailing practice.
7. On the pleadings of the parties, the following issues were framed:‑
(1) When did the defendant No. 3 become a partner in the firm, defendant No. 1
(2) Was the said firm dissolved on 11th or 14th January 1954 If so, what is the effect
(3) Whether the defendants 4 and f 5 on attaining majority elected not to become partners of the defendant No. 1 If so, to what effect
(4) Are defendant Nos. 3, 4, 5, 6 and 7 not liable for the debts of defendant No. 1 (1) and for the transactions mentioned in paragraph (2) of the plaint
(5) Whether the defendant No. 2 executed the document mentioned in para. (7) of the plaint under coercion and undue influence exercised on him by the plaintiffs If so, what is the effect
(6) Is defendant No. 2 the owner of the suit property or only a Benamidar If s0, what is the effect
(7) Whether the defendant No 2 did not possess any legal right or authority to mortgage the suit property to the plaintiffs If so, what is the effect
(8) Is the property in dispute trust property and are defendants 4‑7 beneficiaries in respect thereof and therefore entitled to hold possession of the same as owners If so, what is the effect
(9) Whether the plaintiffs were and are not empowered to advance any money or give any credit on the security of immovable property, under the provisions of the National Bank of Pakistan Ordinance, 1949 If so, is the security given by the defendants not enforceable for that reason
(10) Whether the plaintiffs are not mortgagees in good faith, for good consideration and without notice Y If so, what is the effect
11. What, if any, is the amount due from the defendants or any one of them to the plaintiffs
(12) What is the relief, if any, to which the plaintiffs are entitled to
8. Issues 1, 2 and 3, which relate to the admission of defendants 3 to 7 into partnership after the dissolution of the firm in January 1954 and to the election of‑defendants 4 and 5 on attaining majority as partners of defendant No. 1, were conceded in favour of defendants. No discussion is consequently required to decide them. They are decided in favour of the defendants.
9. Issue No. 4 deals with the question as to whether defendants 3 to 7 are liable for the debts of defendant No. 1 and for the transactions in the plaint. Defendant 3 is the wife of defendant No. 2 whereas defendants 4 to 7 are his children. Defendants 4 to 7 were admittedly minors at the time when the transaction between defendant 2 and the plaintiffs took place. It is also admitted that defendants 4 to 7 were only admitted to the benefits of the partnership. They can not therefore be liable for the losses of the partnership or the liabilities which were incurred before their majority by defendant No. 2 with the plaintiffs. There is also nothing on the record to indicate that defendant No. 3 when she was taken as a partner in the firm Fahim & Co. ever knew that she was being taken in as a partner.
10. Issue No. 5 which relates to the question as to whether defendant 2 had executed the documents under coercion or undue influence has been pressed with respect to undue influence only of the plaintiffs on defendant No. 2. The learned counsel for defendant No. 2 has argued that the total liability as admitted by defendant No. 2 in his written statement up to 17th June 1952 amounted to Rs. 1,97,638‑10‑11 only and the fact that defendant 2 was called upon to execute and did execute a pronote for Rs. 2,50,000 is a clear proof of the fact that the pronote was executed owing to undue influence. I see no force in this argument because the pronote executed by defendant No. 2 was not meant to make him liable to pay Rs. 1,50,000 irrespective of receipt by him of that much money. It was executed to secure the limit upto which money could be withdrawn. Even the suit has not been filed on the basis of the pronote but on the basis of the statement of account filed with the plaint. The amount of money therefore mentioned in the pronote is not sufficient for holding that defendant No. 2 had executed the pronote and other documents under undue influence. This issue is consequently decided against defendant No. 2.
11. Issues 6, 7 and 8 are connected and will betaken up together. The subject‑matter of these issues in substance is whether Iqbal Manzil (Plot No. 670 Jamshed Quarters) was the property of defendant No. 2 or whether he was holding it as a Benamidar on behalf of his children and as such had no right or authority to equitably mortgage it. It is agitated under issue No. 8 that Iqbal Manzil is a trust of property and that defendant No. 2 was holding it for the benefit of the beneficiaries who are defendants 4 to 7. The crux of these issues is the ownership of Iqbal Manzil. It is an admitted position that Iqbal Manzil was purchased in the year 1947 from a Hindu in the name of defendant 2. It is also admitted that the sale deed was executed in favour of the defendant No. 2. It is contended that defendant No. 2 at the time of purchasing this property had not invested his own money. It is alleged that Mr. Fahim had sent the money from Bombay to be paid for purchasing it for the benefit of the children of defendant No. 2 because their mother was the niece of Mr. Fahim and he had no children of his own. these premises it was contended that defendant No. 2 was holding this property in trust for the benefit of defendant 4 to 7 as a Benamidar. Reliance has been placed on behalf of the defendants on the evidence of Ramnik Lai and Rochiram in, particular These two witnesses were examined in Suit No. 1; 69 of 1953 on commission and their evidence by consent was brought on the record of this case as Exh. 12.0. Ramnik Lal is said to have been deputed by Mr. Fahim to purchase this property and' according to him he had paid the consideration on behalf of Mr. Fahin, at the time of the registration of the sale deed. Rochiram on the other hand has stated that Mr. Fahim himself had negotiated the transaction and purchased the house., He, however, admits that Rs. 15,000 were paid as earnest money by Ramnik Lai on behalf of Mr. Fahim. He has also admitted that the sales price of Rs. 1,40,000, was paid by Mr. Fahim and Ramnik Lal Amjad Husain Nadeem is another witness who has been examined on behalf of the defendants as D.W. 3. He is the nephew of Mr, Fahim. According to his evidence, he was sent from Bombay in 1947 for looking out for a house. He has stated that he had selected Iqbal Manzil and paid Rs. 15,000 as earnest money, He does not state that the earnest money was paid by Ramnik Lal. He admits that Mr. Fahim was present at the time of the registration of the sale deed and has paid the money himself before the Sub‑Registrar. Defendant No. 2 has categorically stated in his evidence that the transaction about this house was made at a time when Mr. Fahim was not present in Karachi, The evidence of all these witnesses appears to be totally contradictory. . None of them has agreed on who paid price or who paid the earnest money. It is inconceiv able that the payment would be left to be made by Ramnik Lal or Amjad Hussain Nadeem if Mr. Fahim was himself present. No accounts of any kind have been produced to prove the source of the money. The argument advanced on behalf of the plaintiffs is that admittedly Mr. Fahim and defendant No. 2 were partners in a firm at Bombay and there is nothing to indicate even if it be assumed that the money was paid by Mr. Fahim, that this money did not belong to defendant No. 2. The learned counsel for the defendants has relied upon, letters. Exhs. 120‑B and 120‑C. According to him, these letters were written by Mr. Fahim to Amjad Hussain Nadeem and defendant No. 2 and that they indicate that lqbal Manzil was intended to be purchased for the benefit of the children but the name of their father was used as a Bennnddur. 1 pointed out to the learned counsel for the defendants that the letter, Exh. 120‑C; could not relate to the purchase of Iqbal Manzil as it was writer on the 10th of June 1947 whereas Iqbal Manzil was purchased on the 11th of June 1947. 'The learned counsel conceded this So far as letter, Exh. 120/B, is concerned, it has no reference whatever to Iqbal Manzil. Even if it be assumed that it has some reference for Iqbal Manzil it will not confer the ownership of Iqbal Manzil on Mr. Fahim or on the children of defendant No. 2. The most important documents for deciding as to who was the real owner of this property are Exh. 120‑A and the written statement of defendant No. 2 in Suit No. 1069 of 1953 Exhibit 120/.A is dated 13th June 1948 and purports to be a declaration made by defendant No. 2 that Iqbal Manzil was purchased from the money of Mr. Fahim and that he was prepared to re‑transfer the property to him at any time. Even this declaration does not gay that Mr. Fahim had purchased this property for the children of defendant No. 2 and that defendant No. 2 was holding the property in trust for them. The question therefore that the property was purchased for the children by Mr. Fahim and defendant No. 2 was holding it in trust is completely foreign to this declaration and obviously gives rise to an inference that this theory is of subsequent creation.
12. Suit No. 1069 of 1953 was filed by the brothers of Mr. Fahim claiming Iqbal Manzil to be the property of Mr. Fahim and asking for their share in it. Defendant No. 2 in. this case was the defendant in that suit also. He had filed a written statement in that suit and had very clearly stated that the property did not belong to Mr. Fahim nor had Mr. Fahim paid for it. He also in clear terms stated that the property belonged to him. These two documents mentioned above leave no room for doubt that Iqbal Manzil was purchased by defendant No. 2, and that it belonged to him at least qua the claim of defendants Nos. 4 to 7.
14. (sic) Even if the case of defendant No. 2 be accepted that Iqbal Manzil was purchased with the money of Mr. Fahim for the benefit of the children of defendant No. 2 it cannot be construed to be the trust property and defendant No. 2 cannot be said to have been holding it in trust for defendants 4 to 7. Section 5 of the Trust Act reads as under:‑
"(5) No trust in relation to immovable property is valid unless declared' by a non‑testamentary instrument in writing signed by the author of the trust or the trustee arid registered, or by the will of the author of the trust or of the trustee.
No trust in relation to movable property is valid unless declared as aforesaid, or unless the ownership of the property is transferred to the trustee.
These rules do not apply where they would operate so as to effectuate a fraud."
Under this section no trust in relation to immovable property is valid‑ unless declared by a non‑testamentary instrument in writing signed by the author of the trust or the trustee and registered. The trust also in relation to movable property cannot be valid unless the ownership of the property is transferred to the trustee. On any view of the position taken by the defendants their case cannot fall within section 5 of the Trust Act. Even the learned counsel for the defendants has admitted that section 5 is against him. He, however, stated that he was bringing his case within section 82 of the same Act. Section 82 of this Act reads as under:
"(82) Where' property is transferred to one person for a consideration paid or provided by another person, and it appears that such other person did not intend to pay or provide such consideration for the benefit of the transferee, the transferee, must hold the property for the benefit of the person. paying or providing the consideration.
Nothing in this section shall be "deemed to affect the Code of Civil procedure, section 317, or Act No. XI of 1859 (to improve the law relating to sales of land for arrears of revenue ‑in the Lower Provinces under Bengal Presidency), section 36."
Even this section cannot be invoked for the assistance of tile defendants. Under this section defendant No. 2 cannot be said to be holding the property on behalf of his children. If he was in possession of the property, payment of which was made by Mr. Fahim, then under this section he would be holding it on behalf of Mr. Fahim and not on behalf of his children. Defendant No. 2 is now precluded from urging that he was holding the property on behalf of Mr. Fahim, who had paid for it, in view of the written statement filed by him in Suit No, 1069 of 1953.
15. In view of what has been stated above, I decide all these issues against the defendants.
16. Issue No. 9 is the real issue between the parties and very lengthy arguments have been addressed by the learned counsel for the defendants. The contention put across is that the plaintiffs could not advance money or give any cash credit facility on the security of Iqbal Manzil under the provisions of the National Bank of Pakistan Ordinance 1949. The second argument which does not fall within the ambit of issue No 9 but is pressed into service is that Exh. 54 which purports to be the memo of deposit of title deeds is really a mortgage deed and requires registration under section 17 of the Registration Act, The argument further is that in the absence of registration Exh. 54 is inadmissible in evidence, and that therefore the very bottom of the case that Iqbal Manzil is mortgaged is knocked but.
17. For the purposes of dealing with the arguments advan ced by the learned counsel for the defendants reliance is placed on section 25 (1) (h) of the National Bank of Pakistan Ordinance, 1949, which reads as under:‑
"(25) The Bank is authorised to carry on and transact the several kinds of business hereinafter specified:‑--
(1) the advancing and lending of money and opening of cash, credits upon the security of‑
(h) immovable property or documents of title relating thereto as collateral security only where the original security is one of those specified in sub‑clauses (a) to (f), and subject to such directions as may be issued by the Central Board where the original security is of the kind specified in sub‑clause (g)."
It is being contended that under clause (h) of section 25 (1y of this Ordinance the deposit of title deed in respect of Iqbal Manzil ; could be made if this security were to be treated as collateral and if the original security was one which is specified in sub‑clauses (a) to (f). It is argued that the original security being non‑existent on the day this alleged collateral security of deposit by way of title deeds regarding Iqbal Manzil was made, the collateral security could not be taken. The deposit of title deeds with a view to creating equitable mortgage of Iqbal Manzil thus according to the learned counsel for the defendants was contrary to the provisions contained in section 25(1)(h) of this Ordinance. That being so, it was further argued that section 26 of this very Ordinance would be a ban on the bank against transacting business contrary to what is contained in section 25. The learned counsel for the plaintiffs has repelled this argument by saying that the case of the plaintiffs would be covered by section 25 (1)(c) and (g) in that the pledge of hide, skins, etc., made to the plaintiffs by defendant 2 earlier would be covered by section 25 (1) (c) and (g). I do not agree with what the learned counsel for the plaintiffs has argued. Clause (h) of section 25 (1) authorises that a collateral security be taken by deposit of title deeds only. The word collateral itself connotes that security which is collateral must co‑exist with the original security taken earlier in point of time. The question of collateral security conceivably cannot arise in the event of original security being non‑existent on the day on which the collateral security is taken. Under these circumstances, I see no force in the argument of the learned counsel. He has, however, further argued that section 25 merely requires of the bank not to advance monies unless comp liance is made of what is contained in its clauses (a) to (g) but that this section nowhere prohibits taking of collateral security to secure money already advanced on security in accordance with clauses (a) to (g) and the security so taken having disap peared before the collateral security is taken. I have thought on this argument cooly and I find that there is substance in it. B In the total absence of a prohibition on security being taken to have the advance already made secured, the taking of the security by way of deposit of title deeds, in my opinion, will note be in violation of what is contained in Ordinance XIX of 1949. In support of this view, reference can be made to Ebrahim Azeem v. William Dickson Cruickshand (16SWR203). The relevant portion is reproduced hereunder:‑-
"But if the security was given to secure a debt already incurred and due, we do not think that the taking it was ultra vires. It is one thing to say that the Bank shall not make a business of lending money on mortgage of land and the like, and another thing to say that money being actually due and owing to the Bank, the Bank shall not take the security of land or other immovable property, or any other kind of good security not expressly prohibited, with a view to its own protection. The original lending of money on the security of immovable property is quite a different thing (and affects the general position and business of a Bank quite differently) from taking such security for a debt due. The forbidding the entering into loan transactions on the strength of such security, does not appear to us necessarily to include a prohibi tion against taking such security as a protection against loss in respect of a debt due; and, in the absence of any express prohibition, we do not see why we should infer an intention to impose it, when very possibly, not to say probably, it was never intended that it should be either expressed or implied. Prima facie, a debt having been actually incurred, it appears to us to be clear gain to the creditor to get any security for it, whether by way of mortgage or otherwise; and we think that the taking of such 'security bona fide, is within the general scope of the business of the Bank of Bengal, as it is not expressly declared not to be so." ,
Under the circumstances my own view is that the deposit of title deeds is not contrary to what is contained in Ordinance XIX of 1949.
18. With regard to whether document, Exh. 54 would require registration, the argument of the learned counsel is that this document in itself purports to create the mortgage and therefore requires registration. He has cited numerous cases to enunciate that where a document purports to be a deed of mortgage, it would require registration. There can be no dispute about this proposition. If this document, Exh. 54, could be construed to be a mortgage deed then obviously it would require registration and the same having not been registered will be inadmissible in evidence. But the point that needs consideration really is whether this document is a mortgage deed or a memorandum of deposit of title deeds. My own view in the matter is that it is merely a memorandum of deposit of title deeds and not the mortgage deed. The main consideration is as to whether the mortgage created by the document, Exh. 54, was created prior in time to the document, Exh. 54. This question is effectively considered by reference to Exh. 118 which was written on the same day on which Exh. 54 was written but earlier in point of time. In Exh. 118 defendant No. 2 had requested the plaintiffs to pay off his Habib Bank debt and to keep the title deeds in deposit with them. The equitable mortgage was created after Exh. 118 was written and was followed by the letter, Exh. 54. Here it will be necessary to go through Exh. 54. It reads as under:
Fahim & Company
17th June, 1952.
The Manager,
National Bank of Pakistan,
Local Principal Office,
Karachi,
Dear Sir,
I, F. F. Musharrif of Karachi do hereby confirm that I have this day deposited with the National Bank of Pakistan, Local Principal Officer, Karachi, the title deed relating to my property and detailed in the Schedule hereunder written, with the inten tion of creating an equitable mortgage on the properties, including all my right, title and interest comprising in or arising from the said title deeds for securing to the said Bank the repayment on demand of the amount from time to time advanced by the said bank to the firm of Messrs Fahim & Co. Karachi, of which I am one of the partners and attorney for the other partners with interest at the rate of six per cent. per annum and payable to the said bank on the basis of a promissory note Rs. 2,50,000 (rupees two lakhs fifty thousand only) executed by me in their favour on the 17th June 1952.
Yours faithfully,
(Sd.) F. F. Musharrif
Schedule of title deeds.
A bare reading of this letter clearly indicates that it was written by way of confirmation of the act that had already been done. In other words the equitable mortgage had been created earlier to create an equitable mortgage and Exh. 54 was written to confirm that fact. This letter, in my opinion, is therefore clearly a memorandum of deposit of title deeds and does not itself purport to be a mortgage deed. The first case on which reliance is placed for this point is Official Assignee v. Sind Provincial Co‑operative Bank Ltd (A I R 1943 Sind 36). The relevant portion of the judgment reads as under:
"There seems then no need to frown on an equitable mortgage or to strain the law against it or to regard it as a practice which in the interests of the community should be discouraged and discontinued. On the other hand, if the parties do indeed put their bargain or their contract into a written document, if out of abundant caution they overreach themselves as in I L R 1939 Kar. 287 (P C), then it is the written document which prevails. There will not be, as the learned Advocate for the respondent argues, two separate and distinct and valid mortgages, the equitable mortgage in the forenoon and the legal mortgage in the afternoon. The transaction is one, and in competition between an equitable and legal mortgage, the legal mortgage will prevail and will require registration. But we agree with the learned Judge that in this case Exh. 24 did not contain the bargain between the parties, but merely evidence it. Necessarily, the "memorandum must refer to the equitable mortgage, if it is to evidence it; it may mention the loan, the period of the loan, the rate of interest and describe the property. If an equitable mortgage is proper and lawful thing, there is nothing wrong that evidence, even written evidence of it, should be preserved. If the memorandum becomes so complete as to contain in itself the bargain as such then the written contract supersedes the oral contract, and the parties if they desire merely to evidence that equitable mortgage overreach themselves but they must take risk. Speaking for myself, I think the case before me is a case almost on the verge of what is permitted if the memorandum is to serve only its limited purpose."
The memorandum in the case referred to above reads as under:‑--
" Karachi, 7th August 1937.
To
The Sind Provincial Co‑operative Bank Ltd., Karachi.
Dear Sir,
We confirm having already deposited with you the title deeds of our following property in Karachi as per particulars given hereunder as security by way of mortgage for the sum of Rs. 11,500 (eleven thousand and five hundred) advanced to us by way of over‑draft and for which we have handed you a Demand Promissory note and all interest thereon and all costs and charges and sums that may be, incurred or spent by you.
We undertake at all times, so long as any money remains due to you, to keep the mortgaged property insured against loss or damage by fire in the full value thereof and will duly and punctually pay all premiums and sums of money necessary for such purpose and will duly assign and hand over to you the policy or policies of Insurance and the receipts for every such payment. If default be made in keeping the property so incurred at any time, it shall be lawful for you to effect the insurance and to treat all moneys so, spent as moneys advanced to us.
We declare that the property mortgaged with you is free from all encumbrances or liens of any sort whatever.
Description of property and title deeds deposited. S. No. 47 Sheet M. M. 7, containing about 310 square yards, Machi Miani Quarter, Karachi (Old No. 9 Sheet C‑3). (1) Sanad dated 21st August 1928 issued by the City Deputy Collector, Karachi, in favour of Ghulam Hussain Varoo, Abdul Muhammad Jumo and Hussain Karim. (2) Extract from new property register. (3) Certified copy of partition deed dated 15th May 1929 between Abdul Muhammad Jumo and Ghulam Hussain Varoo and Hussain Karim.
Yours faithfully,
(1) Ghulam Hussain Varoo. (Sd). Ghulam Hussain Varoo:
(2) Hussain Karim. (Sd). Hussain Karim."
A perusal of the above memorandum will make it clear that it is more detailed than the one in the present case and yet a view has been taken that it is just a memorandum and not a mortgage deed.
19. The second case on this point is Rachpal v. Bhagwan das (AIR1950 SC 272). 'The relevant portion runs as under:
"On account relating to the appellant's dealings being examined a large sum was found due to the respondents who demanded payment. The appellant thereupon brought and gave certain title deeds relating to immovable properties belonging to his family, for the purpose of being held as security for the amounts then due and to become due on further dealings. A draft of the memorandum was thereafter prepared and signed and delivered to the respondents. The memorandum was in the following terms: We write to put on record that to secure the repayment of the money already due to you from us on account of the business transactions between yourselves and ourselves, and the money that may hereafter become due on account of such transactions we have this day deposited with you the following title deeds in Calcutta at your place of business at No. 7, Sambhu Mullick Lane, relating to our properties at Samastipur with intent to create an equit able mortgage on the said properties to secure all moneys including interest that may be found due and payable by us to you on account of the said transactions . . . . . .
Held that the memorandum did not require registration."
20. The third case on the point is Sundarachariar v. Narayana Ayyar (A I R 1931 P C 36.). The relevant portion reads as under:‑
"A person in Madras gave a promissory note and on the same date gave a memorandum which contained a list of the title deeds with the introductory words: "As agreed upon in person, I have delivered to you the under mentioned documents as security:
Held: that the memorandum was not other than a written record of the particulars of deeds the subject of an agreement constituted in fact by the act of deposit and the payment of the money, and that it neither purported nor operated to create or declare any right, title or interest in the property included in the deeds, with the result that it did not require registration. Even if it was a condition of the advance that the memorandum was to be given, the fact that the memorandum was prepared, signed and handed over to the mortgagee before the advance of the balance of the money to be secured by the deposit could not alter the nature and meaning of the document. It was and remained a list of the documents deposited and nothing more. It did not embody the terms and of the agreement between the parties and did not require registration."
21. The admitted position on the record is that the title deeds lying with Habib Bank had been taken from there and kept in deposit by the plaintiffs. This letter Exh. 54, is consequen tly a confirmation of the deposit of those title deeds. The deposit of title deeds did not accompany this letter.
22. In view of that has been said in cases cited above, there can be no escape from the conclusion that Exh. 54 is merely a memorandum and therefore does not require registration. The very fact that this memorandum was written on a letterhead and not on a stamped paper is also a circumstance in support of the view I am holding. In view of the above discussions this issue is decided against the defendants. Full Bench decision of this Court reported to in National Bank of Pak. v. Fasihuddin and others (P L D 1964 Kar. 92) also supports me on the conclusions drawn by me.
23. The decision on issue No. 10 will go along with the decision on issue No. 9. There can be no two opinions about the question that 'the plaintiffs are a mortgagee in good faith for good consideration. The plaintiffs had admittedly advanced moneys and that the deposit of title deeds with them had been made with a view to create equitable mortgage for a consi deration.
24. So far as issue No. 11 is concerned, the learned counsel r for the defendants have not been able to challenge any of the items of moneys drawn by defendant No. 2 as shown in statement of account filed with the plaint. In fact it has been admitted that after June 17, 1952 the defendants withdrew from the plaintiffs Rs. 140‑10‑0, Rs. 1,325‑9‑0, Rs. 2,000 and Rs. 5,000. It has also been admitted by defendant No. 2 that the amount due from him on 17th June 1952 was Rs. 1,97,638‑10‑11. The only dispute between the parties is on the rate of interest. The rate of interest as stipulated to be charged from the defendants was 1% above the bank rate i.e. 4 % up to 17th June 1952. The interest agreed upon to be paid after 17th June 1952 is 6 %. The contention raised is that there is no warrant for changing the rate of interest from 17th June 1952. The loan when previously given was at the rate of 4 %. It continued to be at that rate despite the fact that the pledge of the goods vanished on 17th June 1952 and the loan became an unsecured one. When the advances already made and a further advance of Rs. 73,000 and odd made to defendant 2 came to be secured on account of deposit of title deeds there is no justification whatever for increasing the rate of interest. The learned counsel for the plaintiffs has urged that the rate of interest being agreed rate of interest between the parties it cannot be changed unless it be shown that it is unconscionable or exorbitant. I cannot quite agree with the learned counsel for the plaintiffs. As I have already stated, the change in the rate of interest is unwarranted by any circumstance on the record and I am, therefore, inclined to take a view that the increase, in the rate of interest in the circumstances of this case would appear to be exorbitant. I therefore while allowing the claims of the plaintiffs for their principal reduce the rate of interest from 6 % to 4 %.
25. The learned counsel for the defendants have also argued the points which were not covered by the issues. Since they were not covered by the issues they did not require any mention. But since they have been argued, I would make a reference to them and also give my finding that there is no substance in them.
26. The first point raised is that the statement of account filed with the plaint was not in accordance with the Banker's Book Evidence Act of 1891. It is urged that the certified copy does not indicate that it was signed by principal accountant. I have looked at the statement of accounts. It shows that it was signed by an accountant. The burden lay on the defendant to show that the accountant who had signed this statement of accounts was not the principal accountant of the bank. I, therefore repelling the contention of the learned counsel for the defendants, am of the view that the certified copy of the statement of account is in accordance with the provisions of law.
27. The second point put across is that the suit is founded upon the confirmation slip which had been signed by defendant No. 2 from time to time and that they required to be stamped. It is argued that the stamps appearing on these confirmation slips have been put subsequently and as such would not meet with the requirement of law. I am afraid I cannot look into this issue at the stage. Although the defendants knew that the suit was brought within time on the basis of these confirmation slips yet they did not so much as even raise a contention in their written statements that the suit was time‑barred. At no point of time has any defendant stated that the confirmation slips of which a mention was made in the plaint were stamped subsequent to the time when they were signed by defendant No. 2. In view of there being no dispute raised by the defendants on this point the plaintiffs could not foresee what the case of the defendants would ultimately be in the arguments so that they should have examined evidence to establish that the stamps appearing on the confirmation slips were put on them at the time when they were signed by the defendant No. 2. The learned counsel for the defendants concede that no issue on this aspect of the case has been raised. He also concedes that the point in question was not directly or indirectly raised by any of the defendants at any time. I, therefore, see no substance in this point of the counsel for the defendants also.
28. In view of what I have stated above, I decree the suit of the plaintiffs with costs. The decree shall be given to the plaintiffs against defendant No. 2 alone for the sum which will be calculated in the light of the observations made by me pertaining to the rate of interest. A declaration is also given that the property specified in paragraph 8 of the plaint is charged for the payment of the plaintiff's claim.
K.B.A. Suit decreed.
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