SECRETARY OF STATE FOR INDIA IN COUNCIL, REPRESENTED BY THE COLLECTOR OF NORTH ARCOT Vs. MACARUNACHALA MUDALIAR

JUDGEMENT

(1.) This is an appeal by the Secretary of State for India and arises out of a suit filed by one Arunachala Mudaliar and his son on the basis of a mortgage deed (Ex. A) executed in their favour by Narayanaswami Naidu and his sons on the 19 of July, 1925. Since a priority was being claimed on behalf of the Secretary of State, in respect of a sum of Rs. 5,000 advanced to Narayanaswami Naidu on various dates between the 28 of September, 1925 and the 6th of May, 1926, he was also impleaded as a defendant in the suit. The trial Court decreed the plaintiff's claim and overruled the plea of priority raised on behalf of the Secretary of State and the only question which we have now been called upon to decide is if the decision of the trial Court is correct.

(2.) The facts which have given rise to this litigation are simple and may be set forth here. It appears that Narayanaswami Naidu was desirous of installing a Suction Gas pumping plant on his land and intended to move the Government for an advance of Rs. 5,000, to effect this improvement. Before making a formal application, he seems to have approached the Assistant Industrial Engineer first and laid the proposed project before him for his consideration. The officer made two reports in this connection in April and May, 1923 (Ex. XII). In view of the uncertainty of result of the application which he intended to make and at all events of the inordinate delay which an application of this nature would take before it could be finally disposed of, he borrowed a sum of Rs, 2,000 on 26 May, 1923, from the plaintiffs for purchasing an oil engine and executed a promissory note in their favour (Ex. C). Narayanaswami then presented an application to the Supervisor of Industries on the 1 of June, 1923 (Ex. II) in which he asked for "an agricultural loan of Rs. 5,000." During the investigation which proceeded on this application, he made two statements on 23 July, 1924 (Ex. XVII) and on 9 September, 1924 (Ex. XVIII) to which we shall advert later. This application was rejected on 23 October, 1924, although Narayanaswami made another attempt to secure the loan and addressed a letter to the Director of Industries on the 26 of February, 1925 (Ex. G) which was referred to the Collector. He was again examined by the Tahsildar on the 10 of April, 1925 (Ex. XIX) who recommended the loan to be advanced to him (Ex. XXII) and this was finally sanctioned by the Director on the 13 of July, 1925, and communicated to Narayanaswami by means of a letter dated 16 July. 1925 (Ex. XXI). The plaintiffs at this stage appear to have been approached for another loan of Rs. 1,000 or so and found an opportunity to have a deed of mortgage for Rs. 7,500 executed by Narayanaswami and his sons in their favour (Ex. A). This deed was executed on the 19 July, 1925, in consideration of the two prior promissory notes (Exs. B and C) and of a sum of Rs. 1,007-11-0 which is stated to have been advanced at the time of the execution of the deed.

(3.) There is no doubt that the action of the plaintiffs in getting their Simple money debt converted into a secured debt at this stage when the Director of Industries had sanctioned a loan for Rs. 5,000 six days earlier excites one's suspicion against the bona fide nature of this transaction but in the absence of any other evidence, it is impossible to rest our decision on a surmise and a conjecture. They may have been duped by Narayanaswami and his sons in the manner as the Secretary of State and his officers have been. It is equally probable that the knowledge of Narayanaswami having made or revived his application to the Government for a loan, or of the Director having sanctioned it,, was deliberately kept back from the plaintiffs. It is easy to conceive that if they had come to know of these facts, they would not have advanced a further sum of Rs. 1,000; but taking advantage of their position as creditors, they availed themselves of the opportunity afforded to them by agreeing to make a further advance only on the condition of their debt being secured. Whatever be the case, no question was put to Rungaswami Mudali (P.W. 1) who was a clerk of the plaintiffs for 20 years and no evidence was produced on behalf of the appellant which would justify an inference of this nature.