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Suit No. 173 of 1966, decided on 16th October 1968.
S. 58(f) read with Registration Act (XVI of 1908), S. 17 ‑Equitable mortgage ‑ Mortgage by deposit of title deeds‑Memo randum of deposit of title deeds purporting to create in praesenti interest in property in favour of plaintiff Such writing constitutes contract of mortgage and not mere record of completed transac tion, and is compulsorily registrable‑Such writing, in absence of registration, held, not only inadmissible in evidence but also does not create any mortgage‑Deposit of title deeds not independent of such writing‑No right or interest, in circum stances, held, could be : created in property even by deposit of title deeds.
The writings in the instant case contained the undertakings that the properties with regard to which documents of title were depo sited shall not be alienated or encumbered until the loan advanced by the plaintiffs had been repaid, and, further, the plaintiffs were empowered to recover their loan from these properties:
Held, that these writings operate in praesenti to create the relationship of mortgagor and mortgagee between the parties. The writings make the properties in dispute answerable for the claims of the plaintiffs, who are also empowered to recover their dues from the said properties, and, further, the writings contain the under takings that the properties shall not be alienated or encumbered in any manner until the plaintiffs' loans are repaid. These documents are in effect contracts of mortgage and purport to create in praesenti an interest in the properties in the plaintiff's favour. It being so, the documents were compulsorily register able under the Registration Act, 1908, and not having been registered, it has to be held that not only these documents are inadmissible in evidence, but also that these documents do not create any mortgage in the plaintiffs' favour.
Kedernath Dutt and another v. Shamloll Khettry (1873) 11 B L R 405; M. Subramoniam and another v. M. L. R. M. Lutchman and others A I R 1923 P C 50; (Obla) Suddrachariar and others v. Narayana Ayyar and others A I R 1931 P C 36; Sir Hari Shankar Paul and another v. Kedar Nath Saha and others A I R 1939 P C 167; Mst. Begum v. Mst. Fatima Bhai P L D 1961 Kar. 537‑and Azirannessa Bewa v. United Bank of India Ltd. P L D 1963 Dacca 13 ref.
National Bank of Pakistan v. Fahim & Co. and others P L D 1966 Kar. 18 and United Bank of India Ltd. v..Azirannessa Bewa alias Azizannessa Bewa P L D 1965 S C 274 rel.
S. 58(,f)‑Equit able mortgage‑Extract from record of right‑Not a title deed‑ ‑Cannot create equitable mortgage.
The extract from the record‑of‑rights cannot at all be treated as a title deed, because on conveyance of the land no property in the extract, which can be obtained by any person from the survey office on payment of requisite fee, can be said to pass to the purchaser.
Wharton's Law Lexicon, 14th Edn., p. 998; Punjab and Sind Bank Ltd., Lvallpur v. (Firm) Ganesh Das Nathu Ram and others A I R 1935 Lah. 721; Punjab and Sind Bank Ltd., Lyallpur v. Gurdit Singh and another A I R 1935 Lah. 957; Jowala Dos Gobind Ram v. Thakur Da.s A I R 1936 Lah. 251 and Jiwan Das v. Peoples Bank of Northern India A I R 1937 Lah. 926 rel.
Roberts v. Crofts 53 E R 343 and Dixon v. Muchleston (1873) 8 C A C 155 distinguished.
Gangabai and others v. Fakirgowda Somaypagowda Desai and others A I R 1930 P C 93 ref.
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‑Must be construed strictly‑Agent can neither go beyond nor deviate from terms of power‑of‑attorney-----Attorney authorised only to manage principal's property and to obtain loan on behalf of principal on security of principal's pro perty‑Such authority, held, cannot be extended so as to enable attorney to mortgage property of principal for loan obtained by third party.
A power‑of‑attorney is a. written authorisation by which the principal appoints another person as his agent and con fers upon him the authority to perform specified acts on behalf of the principal. The primary purpose of an instrument of this nature is to evidence the authority of the agent to third parties with whom the agents deal. The rule is now well‑established that the power‑of‑attorney must be strictly construed and strictly pursued. A power‑of‑attorney is held to confer only those powers which are specified therein, and the agent may neither go beyond nor deviate from the terms of this instrument, that is, the act done should be legally identical with what is authorised to be done by the instrument.
A contract by an agent which makes his principal liable as surety is of an extraordinary nature. Ordinarily such a contract does not come within powers of the most general nature contain ed in an instrument by which the agent is appointed as attorney. The authority to bind a principal by a contract of surety ship must be express, particularly when the principal is proposed to be made liable for loans advanced to a third party.
S. 58(f)‑Equit able mortgage‑Mortgage not proved in favour of plaintiff for want of registration of memorandum of deposit of title‑deeds Advance of loan and receipt thereof, however, not denied by defendant‑Plaintiff, in circumstances, 1held, entitled to money decree.
P. T. Krishnaswamv Ayyangar v. Chevula Kamalamma and others A I R 1941 P C 90 rel.
Z. H. Lari with I. A. Lari for Plaintiff.
A. Aziz and Salahuddin for Defendants.
Dates of hearing: 3rd October, 12th, 13th, 14th, 20th and 21st December 1967.
This mortgage suit has been brought by the Eagle Star Insurance Company Limited to enforce its claim of Rs. 8,14,819' 15 by sale of the various properties described in the plaint and said to have been mortgaged by the defendants to the plaintiff as security for the said amount. The defendants Nos. 2 to 10 are share‑holders of Defendant No. 1 and defendants Nos. 2 to 7 constitute its board of directors. On 16‑3‑1964 the defendant No. I obtained a loan of Rs. 6,25,000 under the loan agreement, Exh. 6, clause 5 of which provided that the defendant No. 1 will give "proper securities and guarantees" for securing repayment of the loan. On the same day, the defendant No. 2, Nisar Ahmad, as Director of the defendant No. I, gave a written undertaking, Exh. 6/2, to deposit with the plaintiff title‑deeds with regard to the defendant No. 1's property, that is, plot of land bearing No. D/131 situated within the Sind Industrial Trading Estate, Karachi. On the same day, the following further documents were executed:
(i) Memorandum, Exh. 6/3, evidencing deposit with the plaintiff of extracts from the record‑of‑rights relating to the plot of land bearing No. 13‑F.T.4 (Old S. No. J. 1‑B/A), Frere Town, Karachi, with building thereon and land with building bearing Survey No. S. R. 3 (Old Survey No. B‑4/4‑B) Serai Road, Karachi, the said memorandum being signed by defendant No. 2 in his capacity as one of the co‑owner.; of these properties and as attorney of defendants Nos. 4, 5 and 6, namely, Muhammad Salim, Muhammad Bashir and Muhammad Suleman, and by defendant No. 3, Muhammad Umar, as one of the co‑owners and as attorney of defendant No. 8, namely, Zubaida Begum, widow of Haji Muhammad Usman, and by Fazal Rahman, defendant No. 7 ;
(ii) Memorandum, Exh. 6/4, evidencing deposit of sale‑deed of properties Nos. 165‑H/A and 165‑H‑B, Block No. 3, P. E. C. H. Society, Karachi, belonging to the defendant No. 8, but signed by Muhammad Umar, the defendant No. 3, as attorney of defendant No. 8 ;
(iii) Memorandum, Exh. 6/5, evidencing deposit of sale deed dated 16‑3‑1964, of the plaint, machinery, etc. of razor blade factory situated on Plot No. D/131, S. I. T. E., Karachi, belonging to defendant No. 1 and signed by Nisar Ahmad, the defendant No. 2, in pursuance of resolution No. 3 dated I‑2‑1964, of the defendant No. 1's Board of Directors;
(iv) Deed of guarantee, Exh. 6/7, executed by Muhammad Umar, defendant No. 3, on his own behalf and as attorney for defendant No. 8, and by defendant No. 7, namely, Fazal Rahman and defendant No. 2 Nisar Ahmad on his own behalf and as attorney of defendants Nos. 5 and 6.
(v) Deed of guarantees, Exh. 6/8, executed by defendant No. 3, Muhammad Umar, on his own behalf and by defendant No. 2, Nisar Ahmad, on his own behalf and as attorney of defendants Nos. 4, 5 and 6.
2. On the 27th April 1964, the plaintiff advanced another loan of Rs. 75,000 to the defendant No. 1 under the loan agreement of the same date which is on record as Exh. 6/1. This second loan also was agreed to be secured by mortgagees and guarantees. Accordingly, the following documents were executed and delivered to the plaintiff:
(i) Memorandum, Exh. 6/16, evidencing deposit of an extract from the record‑of‑rights with regard to the 912/1224 share in property bearing Survey No. 80 (old Survey No. A/1) Bath Island, Karachi, belonging to the defendants Nos. 2 to 10, and executed by Nisar Ahmad, defendant No. 2, on his own behalf and as attorney of Muhammad Salim and Muhammad Bashir, defendants Nos. 4 and 5, and of Rukhsana Begum and Asmat Begum defendants Nos. 9 and 10, and by Muhammad Umar, on his own behalf and as attorney of defendant No. 8, namely, Zubaida Begum, and by Muhammad Suleman, defendant No. 6, and Fazal Rehman, defendant No. 7 ;
(ii) Memorandum, Exh. 6/17, evidencing deposit of sale deed, dated 12th March 1964, with regard to plot D/131, S. I. T. E., Karachi, on which the razor blade factory is situated, the memorandura being signed by Nisar Ahmad defendant No. 2 on behalf of the defendant No. 1, in pursuance of resolution No. 3, dated 1st February 1964, passed by the Board of Directors of this defendant ;
(iii) Deed of guarantee, Exh. 7/11, executed by Muhammad Umar, defendant No. 3, on his own behalf and as attorney of Zubaida Begum, defendant No. 8, and by Nisar Ahmad, defendant No. 2, on his own behalf and as attorney of defendants Nos. 4, 5 and 6, namely, Muhammad Salim, Muhammad Bashir and Muhammad Suleman, and by Fazal Rehman the defendant No. 7 ;
(iv) Deed of guarantee, Exh. 7/12, executed by Muhammad Umar, defendant No. 3, and by Nisar Ahmad defendant No. 2, on his own behalf and as attorney of defendants Nos. 4, 5 and 6, namely, Muhammad Salim, Muhammad Bashir and Muhammad Suleman.
The two deeds of guarantee, Exhs. 7/11 and 7/12, do not contain the date of execution but the stamp papers on which these guarantees are endorsed have been shown to have been issued on 17‑4‑1964, and according to P. W. Syed Muhammad Taqi, these guarantees were executed in his presence on 24th April 1964.
3. It will be noted that the documents mentioned above have been executed by some of the defendants on their own behalf, and as attorneys of the other defendants. The instruments under which some of the defendants acted as attorneys for the others and Exhs. 6/9, 6/10, 6/11 and 6/12. Exh. 6/9 is a copy of the power‑of‑attorney dated 20th March 1964, given by Rukhsana Begum and Asmat Begum, defendants Nos. 9 and 10, to Nisar Ahmad, defendant No. 2, by which the latter was authorised to manage and supervise the movable and immovable properties belonging to these defendants. Clauses Nos. 3 and 5 (the only clauses relevant for the purpose of the present suit) of these instruments empower Nisar Ahmad to let, mortgage, sell or absolutely dispose of the properties belonging to these defendants and to borrow money in their names and on their behalf upon the security of their properties. Exh. 6/10 is the copy of the power‑of‑attorney given by defendants Nos. 4 and 5, namely, Muhammad Salim and Muhammad Bashir, to Nisar Ahmad, defendant No. 2. Clauses 3 and 5 of this document are in identical terms with those of Exh. 6/9. From the copy on the record, it is not clear as to when this instrument was executed. Exh. 6/ 11 is the power‑of‑attorney dated 22‑2‑1964, given by Muhammad Suleman, defendant No. 6, to Nisar Ahmad, the defendant No. 2 and is in identical terms with Exh. 6/9 and Exh. 6/10. Exh. 6/12 is the copy of power‑of -attorney given by Zubaida Begum, defendant No. 8, to Muhammad Umar and Muhammad Suleman, that is, defendants Nos. 3 and 6, whereby they were empowered to manage this defendant's property, that is, bungalows bearing Nos. 165‑H/A and 165‑H/B. The relevant portion of this instrument is clause 11, which empowers the attorneys to sell, mortgage, or transfer any messages, land, hereditaments and premises . . . . . "belonging to the executant and to receive the consideration money . . . . ." and "to execute and seal any documents . . . ."
4. The defendants, in their written statements, took various defences to controvert the plaintiff's claim. In the main, these defences are that the documents evidencing deposit of title‑deeds constitute bargains of mortgages, and being unstamped and un registered documents, are inadmissible in evidence and did not create any right or interest in the properties to which these documents relate ; that these documents are not title‑deeds and the deposit thereof could not create any mortgage in the plaintiff's favour ; that the various powers‑of‑attorney referred to above did not empower the attorneys either to give guarantees on behalf of their principals or to mortgage the principals' properties, and accordingly such guarantees and mortgages, to the extent of the principals' shares in the said properties, were in operative ; and that the loan *agreements, the guarantees and writings whereby documents of title are alleged to have been deposited with the plaintiff were without consideration and therefore the plaintiffs were not entitled to any decree, either for sale of these properties or for repayment of the loans.
5. On the pleadings of the parties, the Court settled the following issues on 4‑9‑1967
(i) Whether the properties at items (i), (if), (iii) and (iv) stand mortgaged to the plaintiffs.
(ii) Is the mortgage of the said properties without consideration.
(iii) Whether the guarantees mentioned in the plaint are without consideration and otherwise invalid.
(iv) Relief.
6. At the hearing, the defendants' learned Advocates, Mr. A. Aziz and Mr. Salahuddin, stated that it is the defendants' contention that neither the properties mentioned at items (i), (ii), (iii) and (iv) of paragraph 1 of the plaint, nor the properties mentioned at items (v) and (vi), can be treated to have been mortgaged with the plaintiffs. Accordingly, I would amend Issue No. 1 in this way‑"Whether the properties, which are subject‑matter of the suit, are mortgaged with the plaintiffs" With regard to issue No. 2, the main contention of the defendants is that so far as the properties belonging to defendants Nos. 2 to 3 are concerned their mortgage to the plaintiff is without consideration, as no loan was advanced by the plaintiffs to these defendants. On Issue No. 3, the defendants' stand is that the various powers‑of‑attorneys on record did not authorise the agents to mortgage the properties of their principals or make them liable as guarantors for loans advanced by the plaintiffs to the defendant No. 1.
7. At the trial of the suit the documents referred to above were admitted in evidence with the consent of the parties, but without prejudice to their contentions. The only witness examined was by the plaintiff, this witness being Syed Muhammad Taqi, the plaintiffs Chief Accountant, who produced plaintiffs' notice of demand to the defendants as Exh. 7 / 1, letters Exhs. 7/2, '/3 and 7/4, received from defendant No. 2 and dated 13th March and 6th July 1964, ,end 8th November 1965, and letter dated 27th August 1966, and Exh. 7/5, received from defendant No. 1. The witness also produced Exhs. 7/6 to 7/9, which are plaintiffs' letters to the defendants dated 16th March 1904, and 28th June, 14th July and 31st August 1965. The witness further produced a true copy of Form E' filed with the Registrar of Joint Stock Companies, showing the share‑holders and directors of the defendant No. 1. According to this form, this company has 9 share‑holders, namely, defendants Nos. 2 to 10, and one Fazal Ilahi Paracha, and its directors include this gentleman and defendants Nos. 2 to 7. The defendants Nos. 9 and 10, that is Rukhsana and Asmat, are neither share‑holders nor directors in this company.
8. Issue No. 1.‑Under this issue, the defendants' contention is two‑fold, that is (i) that the memorandums of deposit of title deeds are, in fact, contracts of mortgage and constitute bargains between the parties and purport to create relationship of mortgagor and mortgagee between them in praesenti, and since these documents are unregistered, they are not only inadmissible in evidence but also, by reason of the requirements of section 17 of the Registration Act, 1908, these documents cannot be treated as having created any right or interest by way of mortgage in the plaintiffs' favour and (ii) that no documents of title as such were deposited with the plaintiffs and therefore no mortgage by deposit of title‑deeds can be said to have been effected in the plaintiffs' favour.
9. With regard to the first contention, it will be convenient xo take note of the contents of the writings by which documents .of title are said to have been deposited with the plaintiffs. These writings are Exhs. 6/3, 6/4, 6/5, 6/16 and 6/17. Exh. 6/3, is r with regard to the property bearing No. 13‑F. T. 4, Frere Town, Karachi and its operative part reads as under
"(1) That the documents are sent herewith to the Eagle Star Insurance Company Limited by way of equitable mortgage of the value of the properties described below as additional securities, in consideration of the said Eagle Star Insurance Company Limited having granted loan of Rs. 6,25,000 (Rupees six lacs twenty‑five thousand) only to Messrs Usman Sons Limited of 22, SR. 3, Serai Road, Karachi by agreement of loan, dated 16th March 1964.
(2) That Nisar Ahmed, Muhammad Umar, Muhammad .Suleman, Muhammad Bashir, Muhammad Salim, Fazal Rahman sons of late Haji Muhammad Usman and Zubeda Begum widow of late Haji Muhammad Usman, have interests valued at Rs. 5,93,000 (Rs. five lacs ninety‑three thousand) an the said properties in their own rights by way of inheritance and have right to mortgage such interests as owners thereof, which they hereby mortgage as equitable mortgage with Eagle Star Insurance Company Limited."
(3) That Nisar Ahmad is duly constituted attorney of Muhammad Suleman (by virtue of Power‑of‑Attorney dated 22‑2‑1964) and of Muhammad Salim and Muhammad Bashir by virtue of Power‑of‑Attorney dated 24‑2‑1964) and has full authority to mortgage their shares in the properties and in exercise of the powers, their shares are hereby mortgaged by him.
(4) That Muhammad Umar is duly constituted attorney of Mst. Zubeda Begum (by virtue of Power‑of‑Attorney dated 27‑6‑1963) and has full authority to mortgage her share in the properties and in exercise of such authority, he hereby .mortgages her share.
(5) That the properties in question are free from any kind of encumbrance and shall not be encumbered or alienated by the mortgagors before repayment of the aforesaid loan by Messrs Usman Sons Limited to the Eagle Star Insurance Company Limited.
(6) That the terms hereof shall be binding on the heirs and legal representatives of the mortgagors."
Exh. 6/4 is with regard to bungalow Nos. 165‑H/A and 165‑H/B, Block No. 3, P. E. C. H. Society, Karachi and is written by Muhammad Umar as Attorney for Zubeda Begum, the defen dant No. 8. The relevant portion of this document reads as under
"I Muhammad Umar . . . . do hereby send to you the below mentioned documents to be kept by way of equitable mortgage as additional security for the loan of Rs. 6,25,000 . . only advanced by you to Messrs Usman Sons Limited . . . . . It is also hereby declared that the above said Mst. Zubaida Begum4 is the exclusive owner of the property described below, which is not encumbered in any way and shall not be alienated or encumbered till repayment of the loan above mentioned, in default of repayment by the debtors you shall have full authorities to recover your dues from the below mentioned properties . . . . ."
Exh. 6/5, which is with regard to the plant and machinery of the razor blade factory, reads in the same way as Exh. 6/4. Exh. 6/16 is with regard to 912/1024 shares of the defendants. Nos. 2 to 10 in the property bearing No. 80 (Old Dumber A/1), Bath Island. Karachi. The relevant portions of this document are paragraphs 1, 2, 3 and 5, which read as under :‑
"(1) That the documents set forth in the Schedule are sent herewith to the Eagle Star Insurance Company Limited. (incorporated in England) Jamshed Katrak Chambers, Machi Miani Road, Karachi, by way of equitable mortgage of the said property.
(2) That the shares of the executants in the property are valued at Rs. 32,000 (rupees thirty‑two thousand only) and the same shall be liable to answer the claim of the said Eagle Star Insurance Company Limited, advance in respect of the loan of Rs. 75,000 (Rupees seventy‑five thousand only) under the agreement dated 27th April 1964 to Messrs Usman Sons. Limited of 22, SR‑3, Serai Road, Karachi, and that under the agreement dated 13‑3‑1964 between the same parties for Rs. 6,25,000 (Rupees six lacs twenty‑five thousand only) and the interests and costs thereon.
(3) That the said property shall be liable for the repayment of the above said loans to the extent of its market value on the date when the said Eagle Star Insurance Company Limited desires to make recovery of the unpaid part of the aforesaid loans etc., on breach of the agreement by the said Usman Sons Limited.
5. That the property in question is free from any kind of encumbrance and shall not be encumbered or alienated by the mortgagor before repayment of the aforesaid loans by M/s. Usman Sons Limited to the Eagle Star Insurance Company Limited."
Exh. 6/17 is with regard to the plot and building bearing No. D/131 situated within the area of the Sind Industrial Trading. Estate Karachi, used for the Razor Blade factory. This writing states that:
"Documents described in the Schedule hereto are deposited with the said Eagle Star Insurance Company Limited by way of equitable mortgage on behalf of the said M/s. Usman Sons Limited."
In paragraph 3 it is stated that:
"The said property shall be answerable for all the claims of the said Eagle Star Insurance Company Limited in respect of the above said two loans."
The other relevant portions of this writing are paragraphs 5 and 6 which read as under:‑
"5. That the property mortgaged is not encumbered in any manner and shall not be encumbered or alienated in any manner whatsoever till satisfaction of the said loans.
6. That this deed and the terms hereof to be binding on the said Usman Sons Limited, its Directors, successors, executors, assigns and representatives."
10. The question is whether these writings constitute contracts of mortgage or are merely records of completed transac tions. The question as to whether a memorandum of deposit of title‑deeds is a contract of mortgage and accordingly compulsorily registrable under the Registration Act, or merely a record of transaction already completed and therefore not registrable, has been discussed in several decisions. I would first refer to the judgment of Sir Richard Couch in Kedernath Dutt and another v Shamloll Khettry. ((1873) 11 B L R 405) The learned Chief Justice laid down this test on the question at issue‑"If the memorandum is of such a nature that it can be treated as a contract for the mortgage, and what the parties considered to be the only repository and appropriate evidence of their agreement, it would be the instru ment by which an equitable mortgage was created, and would come within section 17 of the Registration Act. On the other hand, if the writing is nothing more than a statement by the mortgagor of the fact that he has deposited the title‑deeds, then this writing cannot be treated as one coming under section 17 of the Registration Act". The question came for consideration before the Judicial Committee of the Privy Council in M. Sub -ramoniam and another v. M. L. R. M. Lutchman and others (A I R 1923 P C 50) The writing in this case was to this effect "We hand you here with title‑deeds relating to 5th class Lot, Nos. 78, 79 and 80, Block E, which measure 20 < 50 with building thereon . . . . . This please hold as securities against advances made to us." It was here held that if the writing is of such a nature that it can be treated as a contract for mortgage, then it would be the instrument by which an equitable mortgage was created and would come within section 17. With regard to the writing which was in evidence in this case, it was held that this constituted a contract for mortgage, presumably on the ground that the writing operated in praesenti. The point was again discussed by the Judicial Committee of the Privy Council in Obla Sundrachariar and others v. Narayana Ayyar and others (A I R 1931 P C 36). The memorandum in this case contained this statement:‑"As agreed upon in person I had delivered to you the under‑mentioned documents as security', and these words were followed by a list of the title deeds. It was held that the writing did not constitute the bargain between the parties and was accordingly not compulsorily registrable under the Registration Act. In another case, Sir' Hari Shankar Paul and another v. Kedar Nath Saba and others (A I R 1939 P C 167) the Judicial Committee held that where the writing not only evidences the deposit but contains essentials of the transaction, expressly conferring power of sale on the mortgagee and in fact purports to be the instrument effective to create an interest in the property, then such document requires registration. It is not necessary to refer to the decisions of the various High Courts in pre‑Partition India. But I will refer to the cases in which this question has been discussed by the Courts in Pakistan. In Mst. Begum v. Mst. Fatima Bhai (P L D 1961 Kar. 537) the writing by which the title deeds were deposited read as follows:
"In consideration of the sum of Rs. 60,000 (rupees sixty thousand) lent and advanced by the mortgagee to the mortgagor as aforesaid (the receipt whereof is hereby also acknowledged) the mortgagor has this day deposited with the mortgagee in Karachi the Documents of Title specified in Part II of the Schedule hereunder written relating to the said premises more particularly described in Part I of the Schedule hereunder with the intent to create a security thereon, and as a first charge for the due repayment of the said sum of Rs. 60,000 with interest with quarterly rest in account, and of all costs between Advocate and client of and incidental to these presents and of suit or proceedings (if any), to enforce payment of the said loan."
It was held that this document constituted the bargain between the parties and was compulsorily registrable under the Registra tion Act. In Azirannessa Bewa v. United Bank of India Ltd. (P L D 1963 Dacca 13) the following writing was held to constitute the contract for mortgage and accordingly compulsorily registrable:
"This is to put up on record that this day I deposited with you at your Head Office in Calcutta the documents specified in the Schedule hereto with intent to create an equitable mortgage upon all my right, title, interest and estate in the properties to which such documents relate for the purpose of securing due repayment to the Bank of demand of all moneys now owing or which may thereafter be owing from me either solely or jointly with any person or persons to the Bank whether on balance of account or by discounting or otherwise in respect of Bills of Exchange, Promissory Notes, Cheques and other Negotiable Instruments or in any manner whatsoever including interest, Bank charges and costs." "I further declare and put on record that the properties covered by documents 1, 2, 3 below stand in the benami of my wife Indu Prova Browmick but I am the real 16 annas owner thereof and the properties were acquired with my money."
In my humble opinion, the rule laid down in these two cases adopts an extreme view and is a departure from the test laid by Sir Richard Couch and the Judicial Committee in the cases which have been referred to above. I will also refer to another decision of the Karachi Bench, that is, National Bank of Pakistan v. Fahim & Co. and others (P L D 1966 Kar. 18) in which the following writing was held by Khamisani, J, as a mere confirmation of deposit of title‑deeds and not a contract of mortgage.
"I, F. F. Musharrif of Karachi do hereby confirm that I have this day deposited with the National Bank of Pakistan, Local Principal Office, Karachi, the title‑deed relating to my property and detailed in the Schedule hereunder written, with the intention 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."
With respect I would say that this view correctly represents the legal position with regard to the question as to whether a memorandum of deposit of title‑deeds is compulsorily registrable under the Registration Act. The view taken in this case is also in conformity with the test laid down by the Supreme Court in United Bank of India Ltd. v. Azirannessa Bewa alias Azizanessa Bewa (P L D 1965 S 274C ). The writing which came up for consideration before their Lordships was to the following effect:
"(1) this is to put on record that‑
(2) this day I deposited with you with your Head Office in Calcutta the documents specified in the Schedule hereto;
(3) with intent to create an equitable mortgage upon all my right, title, interest and estate in the properties to which such documents relate;
(4) for the purpose of securing due repayment to the Bank on demand of all moneys now owing or which may hereafter be owing from me."
It was held that the words contained in these letters do not purport to create any relationship in praesenti Cornelius, C.J., who delivered the judgment, further observed that:
"The mention of the deposit is in the past tense, i.e. I deposited.' There are no words used to show that in praesenti the security was being created, but it is said I deposited .the documents . . . .with intent to create an equitable mortgage' and in the light of the observations in the judgment of the Privy Council last cited, the possession of such an intent at the time of deposit, being in the past, is capable of being proved by production of the document in evidence. It is indeed probable that the language employed in these letters of deposit' is derived from the declaration of law by the Judicial Committee in the case of Sundarachariar, which (we say so with respect) is entirely correct."
11. Turning to the present case, on the test laid down by the Judicial Committee and approved by the Supreme Court, the (1) P L D 1965 S C 274 only view which can be taken is that the writings before me constitute contracts of mortgage and create the relationship of mortgagor and mortgagee between the parties in praesenti and are not mere records of completed transactions. Thus, in Exh. 6/3 the words are "that the documents are sent herewith. . .by way of equitable mortgage. . .", "which they hereby mortgage as .equitable mortgage with Eagle Star insurance Company Limited"; "that Nisar Ahmad . . . has full authority to mortgage their (that is his Principals'; shares in the properties and in exercise of the powers their shares are hereby mortgaged by him" ; "that Muhammad Umar is duly constituted Attorney of Mst. Zubaida Begum. . . He hereby mortgages her share"; "and that the properties in question are free from any kind of encumbrance and shall not be encumbered or alienated by the mortgagors before repayment of the . . . loan". The words in Exh. 6/4 are. . . "I Muhammad Umar do hereby send to you the below mentioned documents,, to be kept icy way of equitable mortgage. , "It is also hereby declared that the above said Mst. Zubaida Begum is the excl:asive owner of the property described below, which is not encumbered in any way and shall not be alienated or encumbered till repayment of the loan above‑mentioned"; and "in default of repayment by the debtors you shall have full authority to recover your dues from the below mentioned pro perty." It will be noted that the writings contain the undertakings that the properties with regard to which documents of title were deposited shall not be alienated or encumbered until the loan advanced by the plaintiffs had been repaid, and, further, the plaintiffs are empowered to recover their loan from these properties. Exh. 6/5 is on the same line as Exh. 6/4. In Exh. 6/16, it is stated that "the documents set forth in tile Schedule are sent herewith. . .; "that the shares of the executants in the properties. . .shall be liable to answer the claim of the plaintiffs"; "that the said properties shall be liable for the repayment of the above‑said loans to the extent of its mortgage value"; that the said property "shall not be ecumbered or aliena ted by the mortgagor before the repayment of the aforesaid loans." Exh. 6/17 also states that "the documents described in the Schedule hereto are deposited with the said Eagle Star Insurance Company Limited by way of equitable mortgage", and that "the said property shall be liable for all the claims of the said Eagle Star Insurance Company Limited. . ." and "shall not be encumbered or alienated in any in‑inn, r whatsoever till the satisfaction of the said loans. 'These writings operate in praesent to create the relationship of mortgagor and mortgagee between the parties. The writings make the properties in dispute answerable for the claims of the plaintiffs, who are also empowered to recover their dues from the said properties, and, further, the writings contain the undertakings that the properties shall not be alienated or encumbered in any manner until the plaintiffs' loans are repaid. In my view, these documents are in effect contracts of mortgage and purport to create in praesenti an interest in the properties in the plaintiff's favour. It being so, the documents were compulsorily registerable under 'lie Registration Act, 1908, and nit having been registered, it has be held that not only these documents are inadmissible in evidence, but also that these documents do not create any mortgage in the plaintiff's favour. Since the deposits of the documents of title are not independent of the memorandums, the deposits also would not create any right or interest in the plaintiffs in the disputed properties.
12. In connection with the contention that the properties in dispute cannot be treated as having been mortgaged with the plaintiffs, the second contention of the defendants is that there was no deposit of title‑deeds as such with the plaintiffs, so as to create mortgage by deposit of documents of title. In this .connection I would here refer to the documents deposited with each memorandum. Under Exhs. 6/3 and 6/ 16 only extracts from the records‑of‑rights with regard to the properties bearing No. 13‑F. T. 4 Frere Town, No. 80 (Old No. A/1), Bath. Island, and No. S. R. 3, Serai Road, were deposited with the plaintiffs. As regards Exh. 6/4. it evidences deposit of sale‑deed for bungalow Nos. 165‑H/A and 165‑H/B Block III, P. E. C. H. Society, Karachi Exh. 6/6 evidences the deposit of registered sale‑deed .dated 12th March 1964 of the plant and machinery of the Razor Blade Factory situated on Plot No. D/131, S. I. T. E., Karachi, and Exh. No. 6/17 the sale‑deed of the land and building of this factory. Thus, it is only with regard to three properties, namely, No. 13‑F. T. 4, No. S. R.‑3/22 and No. 80, Bath Island, that the .question arises whether extracts from record‑of‑rights can be treated as title‑deed. According to coke title‑deeds to land are the "sinews of the land" and therefore so closely connected with land that they pass on a conveyance of the land, without being expressly mentioned; that is, the property in the deeds passes .out of the vendor to the purchaser simply by the grant of the land itself see Wharton's Law Lexicon (14th Edition), page 998. According to this view, the extract from the record‑of‑rights ‑cannot at all be treated as . a title‑deed, because on conveyance .of the land no property in the extract. which can be obtained by B any person from the survey office on payment of requisite fee. can be said to pass to the purchaser. In several decisions, the High. Court of Lahore held that deposit of extracts of the nature which .are before me cannot create equitable mortgage. Thus, in Punjab & Sind Bank Ltd., Lyallpur v. (Firm) Ganesh Das‑Nathu Ram and others (A I R 1935 Lah. 721) a Division 'Bench held that extracts from Jamabandi cannot be said to be documents of title, because the nature of the Jamabandi is nothing more than a Government record prepared for the purposes of collection of revenue, even though by statute such record is declared to be presumptive evidence of title. The same view was taken in Punjab & Sind Bank Ltd., Lyallpur v. Gurdit Singh and another (A I R 1935 Lah. 957), Jowala Das Gobind Ram v. Thakur Das (A I R 1936 Lah. 251) and Jiwan Das v. Peoples Bank of Northern India (A I R 1937 Lah. 926). Mr. Z. H. Lari, the learned Advocate for the plaintiffs, in support of his argument that deposit of extracts from records‑of‑rights would create equitable mortgage, referred to two English cases, namely, Roberts v. Crofts (53 E R 343 ) and Dixon v. Mnchleston ((1873) 8 C A C 155). Both these cases are not at all in point. In Robert v. Croft, the principle laid down was that the whole or even the most material of the title‑deeds need not be deposited. The mortgagor in this case deposited all the title‑deeds, except the conveyance to himself, omission of which document, it was held did not invalidate the equitable mortgage. In Dixon v. Muckleston, the owner of a farm deposited deeds of conveyances of the farm dated 1774 by way of security for money then due. Later he deposited the title‑deeds subsequent to 1774 with his Bankers, again by way of security for money due to them. Thus, part of the title deeds were deposited with the prior mortgagee and part with the subsequent mortgagee. It was held that the prior mortgage was not invalidated due to the omission of the mortgagor to deposit subsequent title‑deeds and that the first mortgagee retained her priority. Thus, both these decisions do not support Mr. Lari's argument that deposit of extracts from the record‑of‑rights, or from revenue records, would create any equitable mortgage. Mr. Lari then referred to the Privy Council decision in Gangahai and others v. Fakirgowda Somaypagowda Desai and others (A I R 1930 P C 93) in which entries under section 7 of the Bombay Land Revenue (Amendment) Act, 1913 were held to be evidence of the facts recorded therein, and as such relevant under the Evidence Act. But this decision does not go to the extent of laying down that these entries are documents of title. The: Judicial Committee itself held in the same decision that the entries are not conclusive of the facts stated therein, but are only relevant as evidence of these facts. This case also is of no, assistance to the plaintiffs.
13. In view of the foregoing discussion, I would hold that: the writings Exh. 6/3, 6/4, 6/5, 6/16 and 6/17, which purport to be memorandums of deposit of title‑deeds, constitute contracts of mortgage and are not mere records of completed transactions,, and since these writings are unregistered, they failed to create any mortgage in the plaintiff's favour. I would further hold that, deposit of extracts from record‑of‑rights under Exhs. 6/3 and 6/16 cannot be treated as deposit of title‑deeds so as to create any equitable mortgage in the plaintiffs' favour.
14. Another question which arises with regard to the alleged equitable mortgages, is whether the powers‑of‑attorneys on record before me empowers the attorneys to mortgage their principal's properties for 10 nS advanced by the plaintiffs to the defendant No. 1. The instruments under which the attorneys purport to have acted are Exhs. 6/9, 6/10, 6/11 and 6/12. Exh. 6/9 is the copy of the power‑of‑attorney executed by defendants Rukhsana and Asmat on 20th March 1964, by which they: appointed their brother, the defendant Nisar Ahmad, to manage their movable and immovable properties, to borrow money in their name and on their behalf upon the security of any of their properties, and to let, mortgage, sell or absolutely dispose of their said properties. Exh. 6/10 is the power‑of‑attorney executed in February 1964, by defendants Muhammad Salim and Muhammad Bashir, appointing defendant Nisar Ahmad as their attorney with same powers as are conferred on this defendant under Exh. 6/9. Exh. 6/11 is the copy of the power‑of -attorney dated 22nd February 1964 given by defendant Muhammad Suleman to Nisar Ahmad and is on the same lines as Exhs. 6/9 and 6/10: Exh. 6/12 is copy of power of attorney executed by defendant Zubaida Begum on 27th June 1963, appointing defendants Muhammad Umar and Muhammad Suleman as her joint and several attorneys. The relevant part of this instrument is clause 11 which reads as follows:
"And also to sell mortgage or transfer any messages, land, hereditaments and premises now or hereafter belonging to me or to exchange all or any of them with other messages, land, hereditaments and premises wherever situate at such price, terms and conditions as my said attorneys shall think fit and to receive the consideration money thereof and to execute sign and seat any documents in respect thereof."
The reading of these instruments makes it clear that the attorneys are empowered only to manage their principals' properties and to obtain loans on their behalf and to mortgage the principals' properties as security for these loans. For reasons which shall be discussed in detail under Issue No. 3, the authority under these instruments cannot be extended so as to enable the attorneys to mortgage the principals' properties for loans obtained by a third party, such as defendant, No, 1 in the present case. Accordingly, the defendants Nisar Ahmad and Muhammad Umar could not mortgage the properties belonging to defendants Muhammad Salim, Muhammad Bashir and Muhammad Suleman, Rukhsana, Zubaida Begum and Asmat by depositing title‑deeds under memorandums Exhs. 6/3, 6/4 and 6/ 16. In view of the conclusions, I would decide the Issue No. 1 against the plaintiffs.
15. Issue No. 2.‑In view of the decision under Issue No. 1, it is not necessary to discuss or decide this issue. But I would here state that defendants Rukhsana and Asmat did not guarantee the loans advanced by the plaintiffs to defendant No. 1. Therefore, as far as they are concerned, the mortgage of their property as security for these loans is without consideration.
16. Issue No. 3.‑This issue raises the question with regard to the validity of the guarantees evidenced by Exhs. 6/7, 6/8, 7/11 and 7/12. Exh. 6/7 and Exh. 6/8 are with regard to the first loan of Rs. 6,25,000. Exh. 6/7 was executed by defendants Muhammad Umar, Nisar Ahmad and Fazal Rahman. Muhammad Umar executed this instrument also as attorney of Zubaida Begum defendant No. 8, and Nisar Ahmad executed this instrument on his own behalf, and as attorney of defendants Muhammad Suleman, Muhammad Salim and Muhammad Bashir, Exh. 6/8 was executed by Muhammad Umar and Nisar Ahmad on their own behalf, and by Nisar Ahmad as attorney for Muhammad Suleman, Muhammad Salim and Muhammad Bashir. Exhs. 7/11 and 7/12 are guarantees for the second loan of Rs. 75,000. Exh. 7/11 was executed by Muhammad Umar, Nisar Ahmad and Fazal Rahman on their own behalf, and by Muhammad Umar as attorney of defendant Zubaida Begum and by Nisar Ahmad, as attorney for defendants Muhammad Suleman, Muhammad Salim and Muhammad Bashir. Exh. 7/12 was executed by Muhammad Umar and Nisar Ahmad on their own behalf, the latter also executing this instrument as attorney of defendants Muhammad Salim, Muhammad Bashir and Muhammad Suleman. No guarantee was executed by or on behalf of the defendants Rukhsana and Asmat. The point which requires consideration is whether Muhammad Umar could lend the credit of defendant Zubaida Begum, and Nisar Ahmad the credit of defendant. Muhammad Suleman, Muhammad Salim and Muhammad Bashir for the loans advanced by the plaintiffs to the defendant No. 1. Muhammad Umar and Nisar Ahmad have acted in the transactions which are the subject‑matter of the suit as agents of their principals under written powers of attorney. Such an instrument is a written authorisation by which the principal appoints another person as his agent and confers upon him the, authority to perform specified acts on behalf of the principal. The primary purpose of an instrument of this nature is to evidence the authority of the agent to third parties with whom the against deal. The rule is now well established that the power‑of‑attorney must be strictly construed and strictly pursued. A power‑of‑attorney is held to confer only those powers which are specified therein, and the agent may neither go beyond nor deviate from the terms of this instrument, that is, the act done should be legally identical with what is authorised to be done by the instrument. The powers‑of‑attorney, Exhs. 6/9 and 6/12, were given by three pardanashin ladies, namely, defendants Rukhsana, Asmat and Zubaida Begum, for the purpose of management of their properties. The power‑of‑attorney. Exhs. 6/10 and 6/11, given by Muhammad Salim, Muhammad Bashir and Muhammad Suleman, were again given for the express purpose of management of these defendants' properties and it is stated in the recitals of these instruments that the principals' pre‑occupation with other matters made it necessary that the should appoint an attorney to look after their business and properties. These instruments do not confer any express powers on the attorney to make their principals liable as sureties for loans given to third parties. Nor such a power can be inferred from these instruments by necessary implication. In this con nection I would refer to a few English and Indian decisions to make my meaning clear. In Jonmenjoy Goondee v. George Alder Watson ((1884) 9 A C 561) the Judicial Committee of the Privy Council held, in a case where the power‑of‑attorney gave to the holders authority to sign any or every contract or agreari_znT, acceptant: or other documents and to make sale, disposw of, assign and transfer Government promissory notes, that these powers did not include the power to pledge the promissory notes. In another case, Bryant, Powis and Bryant, Limited v. La Banque Du Peuple and Bryant Powis, and Bryant, Limited v. The Quebec Bank ((1893) A C 170) Lord Macnaghten, delivering the judgment of the Privy Council, stated this rule for the construction of power‑of‑attorney where an act purporting to be done under a power‑of‑attorney is challenged as being in excess of authority conferred by the power, it is necessary to show that on a fair construction of the whole instrument the authority in question is to be found within the four corners of the instrument, either in express terms or by necessary implication. This rule was applied by the Judicial Committee in a case from Lower Burmah, which is reported as Bank of Bengal v. Ramanathan Chettr and others (A I R 1915 P C 121) and it was held that an agent authorised to make contracts of sale and purchase, charter vessels and. endorse bills and do other acts in connection with.these powers, could not borrow on behalf of his principals by any contract of loan, as such acts are not necessary for the purposes for which the power‑of‑attorney in that case was given. In Reckitt v. Barnett, Pembroke and Salter, Limited ((1929) A C 176), which is a decision of the House of Lords, the power‑of attorney authorised the agent to manage the principal's affair and to sign and execute all documents as might be necessary. By a letter to his bankers, the principal stated that he wished the power to cover the drawing of cheques upon the Bank by his agent. It was held that the power to draw cheques was limited only to the management of the principal's affairs and that issue by the agent of a cheque on the principal's bankers for payment of the agent's own debts was not within his authority. Lastly, I would refer to the decision of the Privy Council in O. A. P. R. M. A. R. Adaikappa Chettair v. Thomas Cook & Sons (Bankers) Limited (A I R 1933 P C 78) which, in my opinion is directly applicable to the question at issue before me. The case, Thomas Cook & Sons (Bankers) Limited gave a power-of-attorney to one of their employees, namely, John Davis for management of the Bank's business, including power to endorse bills. The agent, in pursuance of this power, guaranteed a loan owing from one Peiris to one Ramchandra by writing on the back of the cheque drawn by Peiris "good for payment . . . " and signed this writing as agent of the Bank. It was held that the power‑of‑attorney given to John Davis did not include any power to "back" bills, that is, to give guarantees on behalf of the Bank.
17. A contract by an agent which makes his principal liable as surety is of an extraordinary nature. Ordinarily such a contract does not come within powers of the most general nature contained in an instrument by which the agent is appointed as attorney. The authority to bind a principal by a contract of surety ship must be express, particularly when the principal is proposed to be made liable for loans advanced to a third party. The powers‑of‑attorney, which have been referred to above by me, do not confer any express power on the agents, namely, Nisar Ahmad and Muhammad Umar, to lend the credit of their principals by making them liable as sureties for the loans advanced by the plaintiffs to the defendant No. 1. Nor is it possible for me to hold that such a power should be necessarily implied from the instruments in question. Accord ingly, I would hold that the guarantees given by Muhammad Umar and Nisar Ahmad on behalf of the defendants Zubaida Begum, Muhammad Suleman, Muhammad Salim and Muhammad Bashir are invalid and these defendants cannot be held liable as sureties for the loans taken by the defendant No. 1 from the plaintiffs. For the same reasons, the mortgages by these agents of their principals' properties would also be invalid. However, the defendants Muhammad Umar, Nisar Ahmad and Fazal Rahman, having executed the deeds of guarantee on their own behalf also, are liable as sureties of the defendant No. 1. Mr. A. Aziz and Mr. Salahuddin, however, contended that even with regard to Nisar Ahmad, Muhammad Umar and Fazal Rahman, the guarantees should be held invalid, as these guarantees were given, according to them, for past consideration; in other words, the contention of the learned Advocate for the defendants is that in the first instance loans were advanced by the plaintiffs to the defendant No. 1, and it was thereafter that the deeds of guarantee were executed. However, there is no, evidence to support this contention. None of the three material defendants, namely, Nisar Ahmad, Muhammad Umar and Fazal Rahman, have examined themselves as witnesses. On the other hand, the plaintiffs' witness, Syed Muhammad Taqi, stated in his deposition that the deeds of guarantee were executed at the time the loans were taken by the defendant No. 1 from the plaintiffs. Moreover, it is not in every case that a guarantee for past consideration is invalid. In the Privy Council decision in the case of Kali Charan v. Abdul Rahman and others (AIR1918 P C 226) a surety bond was executed on 27th February 1909, for per formance of the covenants contained in an agreement executed by the principal on 14th January 1909. The Privy Council held the surety bond to have been given for consideration.
18. Since the finding in this case is that no mortgage was crated in the plaintiffs' favour in the properties which are the subject‑matter of the suit, the question arises what decree should be given to the plaintiffs. The advance of the two loans o Rs. 6,25,000 and Rs. 75,000 by the plaintiffs and the receipt o these loans by defendant No. 1 is not denied. Accordingly, I would follow the rule laid down by the Privy Council in P. T. Krishnaswarni Ayyangar v. Chevula Kamalamma and' 'others (AIR 1941 P C 90) and would give a money decree to the plaintiffs. As I have held that the guarantees are valid as regards defendant Nos. 2, 3 and 7, namely, Nisar Ahmad, Muhammad Umar and Fazal Rahman, the money decree will have to be given against them also. The total of the two loans comes to Rs. 7,00,000 and the interest which accrued due up to the date of the present ation of the plaint comes to Rs. 1,14,819.15 at the agreed date of 7 per cent. per annum. Accordingly, I would give a money decree to the plaintiffs for Rs. 8,14,819.15, with further Interest at 7 per cent. per annum from the date of the suit until payment against defendants 1, 2, 3 and 7, namely, Usman Sons Limited, Nisar Ahmad, Muhammad Umar and Fazal Rahman. The plaintiffs will also have the costs of the suit. Order accordingly.
A. F. Money decree passed.
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