GEETARANEE DE Vs. NARENDRAKRISHNA DE

JUDGEMENT

(1.) I dismiss the application. Defendant 1 is the executor of the estate of his father, Ambikacharan De, who died on 2 July, 1925, leaving considerable property. He left him surviving defendant 1, Narendrakrishna De, a grandson and a grand-daughter; who by her next friend, her mother, the wife of defendant 1, is the applicant. In his will, the testator mentioned his debts. He also gave the present applicant a legacy of Rs. 8,000 to be spent for her marriage. Defendant 1 was residuary legatee, and also named as executor, in the alternative. He obtained probate in 1926, and according to the allegations in the petition, he has dissipated the property, with the result that even this sum of Rs. 8,000 cannot be found to satisfy the legacy of the applicant. Among other alienations made by the executor, which are set out in para. 8 of the petition, is the transaction, now challenged, viz., a mortgage, made in January 1927, of No. 11/1, Goabagan Street, Calcutta, for Rs. 30,000 in favour of the Co- operative Insurance Society, Ltd., defendant 2, and the sole respondent to this application. The mortgagee obtained preliminary and final decree, and the property was about to be sold when this application to stay the sale was made. I granted ad interim stay on terms. I do not propose to go further into the facts or to deal with the merits of the application, because, in my view, it is based upon a misconception of the law.

(2.) The mortgage in question (Ex. "B" to petition) was clearly by Narendrakrishna De, as executor. It is sought to affect the transferee on grounds set out in para. 10 of the petition, the material allegations being that defendant 2 had or ought to have had full knowledge that the said loan was required by Narendrakrishna De for his own personal and private purposes. That is an allegation of actual notice or constructive notice. Counsel for the applicant put his case of notice in the following way: that it was the duty of the mortgagee to scrutinize the will. Had the mortgagee so scrutinized the will he would have noticed that the amount of debts left by the testator, according to his own statement, was small though the estate was large; and, secondly, that there was a legacy or a bequest to the present applicant. It was argued from this that not only must notice be inferred, but also fraud of the mortgagee in accepting the mortgage and in bringing the suit. It was not suggested that the mortgagee had any actual notice. It was argued that, according to law, an executor cannot create a mortgage which is valid so far as outsiders are concerned, unless the amount raised was actually necessary and utilized for the purpose of the estate, and, in support of such argument, counsel relied upon the case of Manindra Nandi V/s. Sudhirkrishna Banerji . Now, I think it necessary to point out that this decision establishes nothing of the kind. The question before the learned Judges was entirely one of unsecured loans to an executor continuing the business of the testator. On this question the judgment contains a most careful and complete summary of the law. The question of transfers by way of mortgage or sale by executors was in no way before them. In two places the learned Judges point that out. At p. 228 (of 59 Cal.) they say: We are speaking here of simple cases of loans on promissory notes or hatchitas or other contracts, that is to say, cases where no charge has validly been created on the estate; and, again, at p. 230, they refer to this aspect of an executor's activity, possibly, in language, too restricted. That however was a matter with which they were not dealing. In the case of Shishirkumar Kar V/s. Direndrachandra Kar OC No. 1838 of 1929, decided on 15 February 1932 by <JGN>Ameer Ali</JGN> , J. the two aspects of the matter fell to be dealt with: (a) unsecured loans and (b) transfers by executors. In giving judgment in that case I pointed out that in these two matters the law starts with entirely different considerations: (a). In the case of unsecured loans to an executor the executor is personally liable, and the creditor only obtains a right to proceed against the estate by a circuitous and artificial route, viz., subrogation, for which purpose he has to prove that the loan was necessary, that it was properly applied, and so forth. The mortgagee or transferee has to prove nothing of the sort. (b) In the case of a transfer by an executor one starts with the assumption that the transfer is valid qua the transferee, until and unless it is established that the transferee had notice that the executor was acting in breach of trust. The portion of the judgment in Shishirkumar kar V/s. Direndrachandra Kar OC No. 1838 of 1929, decided on 15 February 1932 by <JGN>Ameer Ali</JGN> , J. dealing with transfers by executors reads as follows: With regard to mortgages by executors, disclosed as executors, the principles appear to me to be as follows: (i) An executor qua executor may make a mortgage for purposes of administration. He may not do so for any other purpose, i.e., for his private purposes (or for carrying on a business left by the testator); (ii) he is however when mortgaging presumed by law to be mortgaging for purposes of administration, and a mortgagee is not bound to see to the application of the money; (iii) if the mortgagee has notice that the executor is not mortgaging for purposes of administration, i.e., if he has notice that the executor is borrowing for his own private purposes, he becomes a transferee with notice of breach of trust, and he gets no better title.

(3.) Thereafter the cases in support of those propositions are set out. In this case, no ground for notice is suggested except that the lender should have scrutinized the will, and from that gathered that there was no necessity for this loan. In my view there is no authority for such a proposition, and, that being the state of the law, I must refuse the application. The application must be dismissed with costs.