GOVIND RAM Vs. MAJOR AUJOHN

JUDGEMENT

(1.) This is an application in civil revision under Section 115, Civil P.C., The applicants Govind Ram Gordhandass and Ramnath Gordhandass are the proprietors of Messrs. Govindram Ramnath & Co. On 5 July 1934 the applicants entered into a contract with Major A.U. John and Mr. G.A. John who are owners of certain mills at Agra. This contract took the form of a mortgage deed and a finance agreement both of which were executed on the same day. Under the mortgage deed the mortgagees agreed to advance the sum of seven lakhs upon the mills belonging to Major A.U. John and Mr. G.A. John (now deceased). The applicants, under the finance agreement undertook to finance the mills up to a figure of four lakhs. The negotiations which culminated in the execution of the mortgage deed and the finance agreement wore conducted in Bombay and the mortgagors, under the terms of the mort-gage dead, were taken bound to repay the amount due under the mortgage at Bombay. The mortgage deed included the following provision: And it is hereby further agreed and declared that no suit or proceeding arising out of and in relation to this indenture shall be instituted in any Court other than the High Court of Judicature at Bombay.

(2.) It is alleged on behalf of the applicants that the mortgagors defaulted in regard to the payment of an instalment due under the aforesaid mortgage. Following upon this default a suit was instituted in the High Court of Judicature at Bombay. Subsequent to the institution of this suit the mortgagors made an application under the U.P. Encumbered Estates Act. The matter was referred to the Special Judge who has passed an order of injunction restraining the applicants from proceeding with their suit in the Bombay High Court. This order of the Special Judge has been upheld by the learned District Judge of Agra in his order of 17th May 1937. Against this order the applicants have preferred this application in civil revision. The learned District Judge appears to have taken the view that the contract entered into between the applicants on the one hand and Major A.U. John and Mr. G.A. John on the other was an illegal contract and mainly upon that ground he has declined to interfere with, the order of the Special Judge restraining the applicants from prosecuting their suit in the High Court at Bombay.

(3.) When the mortgage was executed in 1934 the parties to the contract had in view the Impending debt legislation of the Government of the United Provinces. It was with the object of avoiding the restrictions which were likely to be imposed by that legislation that the aforementioned clause to the effect that no suit or proceeding arising out of and in relation to the indenture should be instituted in any Court other than the High Court of Judicature at Bombay was inserted. We may take it that the applicants would never have agreed to the terms of the hypothecation bond and the finance agreement had not this clause been inserted. When the mortgagors had defaulted and when thereupon the mortgagees filed a suit in the Bombay High Court the mortgagors proceeded to do what they in effect had solemnly undertaken not to do under the mortgage deed; they applied for the benefits of the Encumbered Estates Act and secured an order of injunction against the applicants. They broke their contract. They refuse to honour their signatures. Judged even by the lowest standards of commercial morality their conduct appears to us to be utterly inexcusable. We do not consider it necessary in disposing of this application to say anything as to what the rights of the mortgagors are under the Encumbered Estates Act in the special circumstances of this case. We are only concerned with the question as to whether the order restraining the applicants from prosecuting their suit in the Bombay High Court is an order which should be allowed to stand.