PATELKHANA VENKATARAMASWAMI Vs. IMPERIAL BANK OF INDIA

JUDGEMENT

(1.) The suit which has given rise to this reference was instituted in the Court of the Subordinate Judge of Rajahmundry by the Imperial Bank of India, the 1st respondent. The bank sued to enforce specific performance of an agreement entered into by the 2nd and 3 respondents with the bank to secure repayment of moneys advanced to them. The 2nd respondent is the father of the 3rd respondent. They and the appellants, who are the minor sons of the 3rd respondent, constitute an undivided family. In 1923 the 2nd and 3 respondents started a business, and for this purpose opened an account with the bank. On the 14 August, 1923, in pursuance of an arrangement with the bank, which was willing to finance them, they executed a document in the following terms: In consideration of the Imperial Bank of India advancing us sums of money from time to time we hereby undertake not to alienate or in any way transfer or mortgage any of our immovable property as per schedule attached and which at present is not mortgaged to any one. We hereby agree when called upon to do so to execute legal mortgage of these properties, with or without possession or conveyance to the said bank as the bank may require, so long as we are indebted to the bank. This agreement to be in force till cancelled by us by a registered letter.

(2.) From time to time the bank lent money to the 2nd and 3 respondents without calling upon them to execute any mortgage in its favour. By 1931 the 2nd and 3 respondents had become heavily indebted to the bank and in that year the bank obtained two decrees against them in respect of advances. The first decree was for a total sum of Rs. 25,482-11-0, made up of Rs. 5,070-1-0, due on a promissory note dated 19 December, 1930, and Rs. 20,412-10-0 due on three hundies dated respectively, the 30 March, 1930, the 5 November, 1930 and the 29 November, 1930. The second decree was for Rs. 5,099-3-0, due on a hundi dated 30 October, 1930. In December, 1930, the bank demanded that the 2nd and 3 respondents should execute a mortgage to secure their indebtedness, but this demand was not complied with, and on the 5 April, 1932, the bank sued for specific performance of the agreement which I have just quoted. The suit was decreed and the sons of the 3 respondent were held to be liable to the extent of their interests in the family properties. They have appealed, and contend that there can be no decree for specific performance so far as they are concerned, because the mortgage which the Court ordered to be executed was not in law a mortgage for an antecedent debt As this question is of importance and as the decision in Rajayya V/s. Satyanarayanamurthi (1934) M.W.N. 812 would appear to be in conflict with certain decisions of the Privy Council the following question has been referred to us: Whether money advanced to the father, in a joint Hindu family in pursuance of an agreement to create a mortgage as when required by the lender will constitute an antecedent debt, so as to make the mortgage (when it comes to be executed) binding even on the shares of the sons of the borrower.

(3.) In delivering the judgment of the Privy Council in Sahu Ram Chandra V/s. Bhup Singh (1917) 33 M.L.J. 14 : L.R. 44 I.A. 126 : I.L.R. 39 All. 437 (P.C.), Lord Shaw said that the issue of the father could only be bound where the sale or charge has been made in order to discharge an obligation not only antecedently incurred, but incurred wholly apart from the ownership of the joint estate or the security afforded or supposed to be available by the joint estate. The judgment concluded with the following statement: In truth in order to validate such a transaction of mortgage there must, to give true effect to the doctrine of antecedency in time, be also real dissociation in fact. The Courts in India, wherever such antecedency is found to be unreal and is merely a cover for what is essentially a breach of trust, will not be slow to deny effect to a mortgage so brought into existence.