Judgement Consolidated Appeals (Nos. 148 and 149 of 1920) from seven judgments and decrees of the Chief Court of Lower Burma (May 6, 1918), modifying, as to No. 148, and affirming, as to No. 149, decrees of the District Judge of Akyab. Law Rep. 50 Ind. App. 283 ( 1922- 1923) Imperial Bank of India V. U Rai Gyaw Thu and Company Limited 94 The main question arising in the appeals was whether in respect of certain advances made by the Bank of Bengal (now represented by the appellant bank) at Akyab on the security of a previous deposit by the borrowers of the documents of title of immovable property the bank was entitled to priority over registered mortgages executed in favour of the respective respondents before the advances in question were made but after the deposit with the bank. The material facts appear from the judgment of the Judicial Committee. The deposit in appeal No. 148 was of the documents of title of parcels of land in Pauktaw township being in all of about 304 acres. The borrower signed a letter, in the terms set out in the judgment, making the documents collateral security for advances made or to be made to him; the letter was not registered. In appeal No. 149 the deposit was of the documents of title of lands at Myohaung, where the borrower resided, which was stated to be five or six hours by river launch distant from Akyab ; the borrower signed no document upon depositing the documents with the bank. In both appeals the mortgages executed in favour of the respective respondents were duly registered. In the suits to which appeal No. 148 related the District Judge held that registration of the respondent companys mortgage of June 1, 1914, was not notice to the bank. He made, as prayed by the plaintiff bank, mortgage decrees in respect of advances made by it in 1916, declaring that the mortgage to the bank was entitled to priority over the mortgage to the respondent company. On appeal to the Chief Court the decrees were modified by declaring that the bank was entitled to priority over the respondent companys mortgage only to the extent of Rs. 16,000, being the minimum amount due to the bank after June 1, 1914, and interest thereon, with consequent directions as to marshalling. On appeal to the Chief Court the decrees were modified by declaring that the bank was entitled to priority over the respondent companys mortgage only to the extent of Rs. 16,000, being the minimum amount due to the bank after June 1, 1914, and interest thereon, with consequent directions as to marshalling. In the suits to which appeal No. 149 related the District Judge by his decrees gave the respondents priority in respect of their registered mortgage of May 1, 1914, over advances made by the bank after that date. On appeal the decrees were affirmed. 1923. March 5, 6, 8, 12, 13, 15. Micklem K.C., De Gruyther K.C., and Draper for the appellants. The mortgages by deposit with the bank were prior in date to the mortgages to the respondents ; the bank was therefore entitled prima facie to priority in respect of the advances by s. 48 of the Transfer of Property Act, 1882. Under that Act there is no distinction between a mortgage by deposit of documents of title made in one of the towns mentioned in s. 59. as amended by Act VI. of 1904 to include Akyab, and a mortgage by a written instrument. The place where a contract of mortgage by deposit is made, not the situation of the land, is the test of validity under s. 59 Srinath Roy v. Godadhur Das. (( 1897) I. L. R. 24 C. 348.) It was not suggested below that the letter accompanying the deposit in appeal No. 148 required registration; the respondents cannot now raise that contention or rely upon the subsequent decision of the Board in Subramonian v. Lutchman. (( 1922) L. R. 50 I. A. 77.) Sect. 79 of the Transfer of Property Act, 1882, recognizes the validity in India of a mortgage covering future advances, and, with regard to cases in which a maximum sum is expressed, overrides the law in England as laid down in Hopkinson v. Rolt. (( 1861) 9 H. L. C. 514.) The section however is not exhaustive. The appellants priority under s. 48 is not excluded by s. 80. The words in that section "except in the case provided for by s. 79 "mean" except in the case of a subsequent advance under a prior mortgage"; the excep tion is not restricted to cases in which the prior mortgage expresses a maximum. The appellants priority under s. 48 is not excluded by s. 80. The words in that section "except in the case provided for by s. 79 "mean" except in the case of a subsequent advance under a prior mortgage"; the excep tion is not restricted to cases in which the prior mortgage expresses a maximum. Alternatively, s. 80 is dealing with a further advance secured by a fresh mortgage. That con struction is supported by the marginal reference to "tacking," which is clearly an inapt word to apply to an advance under an existing mortgage Coote on Mortgages, 8th ed., pp. 1248, 1250. But in any case the respondents having failed to require production of the documents are not entitled to priority over further advances made by the bank without notice Collyer v. Finch (( 1856) 5 H. L. C. 905, 928.); Northern Counties Fire In surance Co. v. Whipp (( 1884) 26 Ch. D. Law Rep. 50 Ind. App. 283 ( 1922- 1923) Imperial Bank of India V. U Rai Gyaw Thu and Company Limited 95 482,); Oliver v. Hinton ([ 1899] 2 Ch. 264.); Walker v. Linom ([ 1907] 2 Ch. 104, 114.); Hudston v. Viney. ([ 1921] 1 Ch. 98.) Their conduct amounted to "gross neglect" within s. 78, depriving them of any priority which they otherwise had Madras Hindu Union, Bank v. Venkatrangiah (( 1889) I. L. R. 12 M. 424.); Madras Building Co. v. Rowlandson (( 1890) I. L. R. 13 M. 383.); Shan Maun Mull v. Madras Building Co. (( 1891) I. L. R. 15 M. 268.); Nanda Lal Roy v. Abdul Aziz. (( 1916) I. L. R. 43 C. 1052.) The registration of the respondents mortgages was not notice to the appellants Tilakdhari Lal v. Khedan Lal. (( 1920) L. R. 47 I. A. 239.) The law in India recognizes the giving of security for future advances; registration of an intermediate mortgage may not take place until eight months after the execution of a mortgage; if it deprives the further advance of priority it makes the system commercially useless. In re Bourke (( 1881) 9 L. R. Ir. In re Bourke (( 1881) 9 L. R. Ir. 24.), the principle of which was recognized in Fuller ton v. Provincial Bank of Ireland ([ 1903] A. C. 309.), shows that Agra Bank v. Barry (( 1874) L. R. 7 H. L. 135.) cannot be treated as deciding that in the absence of fraud a registered mortgage always takes priority over one which is unregistered. The prior mortgagee takes priority until he gets notice In re OBurne. (( 1884) 15 L. R. Ir. 189.) Dunne K.C., W. F. Webster and Pennell for the respondents. The decision of the Board in Subramonian v. Lutchman (( 1922) L. R. 50 I. A. 77.) is conclusive against the appellants in appeal No. 148. The respondents should be permitted to rely upon the point now; no parol evidence would have been admissible to rebut the contention. In appeal No. 149 there was no evidence to establish that the security given to the bank was to secure future advances. But in any case s. 80 excludes priority for a further advance (even without notice) except in the case provided for by s. 79—namely, where the maximum to be secured is expressed, and that is not this case. The question whether the respondents had constructive notice does not arise. The plain construction of s. 80 is not affected by the marginal reference to "tacking" Balraj Kunwar v. Jagatpal Singh (( 1904) L. R. 31 I. A. 132, 142.); Punardeo Narain Singh v. Ram Sarup Roy. (( 1898) I. L. R. 25 C. 858.) The Transfer of Property Act constitutes a code on the subject of mortgages in India, and effect should be given to it apart from considerations of English law Bank of England v. Vagliano Brothers ([ 1891] A. C. 107.); Norendra Nath Sircar v. Kamalbasini Dasi. (( 1896) L. R. 23 I. A. 18.) The English decisions rest on the distinction between the legal estate and equitabl rights, but in India there is no distinction between legal and equitable mortgages. The respondents conduct did not amount to "gross neglect" within the meaning of s. 78; in any case it did not "induce" the bank to make the further advances. Until after 1882, when the Act was passed, "gross negligence" in this relation was something amounting to fraud Hewitt v. Loosemore (( 1851) 9 Ha. 449.) ; Northern Counties Fire Insurance Co. Until after 1882, when the Act was passed, "gross negligence" in this relation was something amounting to fraud Hewitt v. Loosemore (( 1851) 9 Ha. 449.) ; Northern Counties Fire Insurance Co. v. Whipp (26 Ch. D. 482.) ; Ratcliffe v. Barnard. (( 1871) L. R. 6 Ch. 652.) A wider meaning was first given to the phrase in Oliver v. Hinton. ([ 1899] 2 Ch. 264.) "Gross neglect" in s. 78 means that which in 1882 would have been treated as "gross negligence" in England. Having regard to the registration system in India that which might be gross neglect in England is not so in India Rangasami Naiken v. Annamalai Mudali (I. L.R. 31 M. 7.) ; in that case the previous Madras decisions referred to by the appellants were considered, and Monindra Chandra Nandi v. Troyluckho Nath Burat (( 1899) 2 Cal. W. N. 750.), on which the respondents rely, was followed. Agra Bank v. Barry (L. R. 7 H. L. 135.) is precisely applicable to this case, the position in Ireland as to registration being the same as in India. The appellants should have searched the register, and under s. 3 must be taken to have notice of the registered mortgages; Tilakdhari’s Case (L. R. 47 I. A. 239.) decided merely that registration was not necessarily notice to all the world. The appellants not having searched were as to subsequent advances "reduced to the rank of puisne incumbrancers" Hopkinson v. Rolt. (9 H. L. C. 514, 555.) Micklem K.C. replied. July 10. The judgment of their Lordships was delivered by Law Rep. 50 Ind. App. 283 ( 1922- 1923) Imperial Bank of India V. U Rai Gyaw Thu and Company Limited 96 LORD DUNEDIN. These are two consolidated appeals. The facts in appeal No. 148 of 1920 are as follows One Abdul Hakim on December 28, 1911, handed to the Bank of Bengal (now represented by the appellants the Imperial Bank of India who took over their business) the following document— "Akyab, December 28, 1911. "To the Agent, Bank of Bengal, Akyab "Dear Sir, "I beg to hand you the title deeds as at foot to be held as collateral security for the advances made by you or to be made by you to me hereafter. I further beg to submit you that all those title deeds as at foot deposited with you are free from encumbrances. I further beg to submit you that all those title deeds as at foot deposited with you are free from encumbrances. "Yours faithfully, "Abdul Hakim II." "DETAILS OF PROPERTIES REFERRED TO ABOVE." The schedule was not filled up. The bank thereafter made advances on current account from time to time. On June 1, 1914, Abdul Hakim was indebted to the bank to the extent of Rs.24,500. His liabilities to the bank subsequently rose and fell; the minimum amount due at any one time being Rs.15,000 on July 8, 1914. The liabilities rose by further advances. On June 1, 1914, Abdul Hakim, without the knowledge of the bank, executed a deed of mortgage of seven parcels of land, of which the titles had been handed to the bank, in favour of a firm who were the immediate predecessors in title of the respondents. This mortgage was registered. The mortgage was to secure Rs. 10,000. The respondents manager did not ask for any title deeds and believed the statement of Abdul Hakim that the properties were free from encumbrances. The facts in appeal No. 149 of 1920 are as follows One Maung Tha Baw deposited the title deeds of certain agricultural lands with the bank at Akyab, as security for advances made to him by the bank from time to time. His indebtedness to the bank fluctuated from month to month. On April 29, 1914, he cleared his account with the bank, but allowed his title deeds to remain in possession of the bank, and on May 23, 1914, took a fresh advance of Rs. 10,000. From that time onwards his indebtedness to the bank con tinued up to the date of the suit. On May 21, 1914, without notice to the bank, during the time when he was temporarily free from debt, Maung Tha Baw executed a mortgage of certain of the lands in favour of the respondents in this appeal, and this mortgage was duly registered at the sub-registration office at Myohaung where Tha Baw lives. The mortgage was for Rs.30,000. The point of contest in both cases is the question of priority of the appellants, the bank, and the respective respondents in respect of their registered mortgages. Before discussing the question or examining the judgments below, it is advisable to set out the sections of the Transfer of Property Act, 1882, on which the questions turn. The point of contest in both cases is the question of priority of the appellants, the bank, and the respective respondents in respect of their registered mortgages. Before discussing the question or examining the judgments below, it is advisable to set out the sections of the Transfer of Property Act, 1882, on which the questions turn. By s. 58 {a) it is declared " A mortgage is the transfer of an Interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability." The section goes on to set forth and distinguish in turn simple mortgages (6), mortgages by conditional sale (c), usufructuary mortgages (d) and English mortgages (e). Sect. 59 provides " Where the principal money secured is one hundred rupees or upwards, a Law Rep. 50 Ind. App. 283 ( 1922- 1923) Imperial Bank of India V. U Rai Gyaw Thu and Company Limited 97 mortgage can be effected only by a registered instrument signed by the mortgagor, and attested by at least two witnesses " ; then continues " Nothing in this section shall be deemed to render invalid mortgages made in the towns of Calcutta, Madras, Bombay, Karachi, Rangoon, Moulmein, Bassein, and Akyab, by delivery to a creditor or his agent of documents of title to immovable property with intent to create a security thereon." It is to be observed that there is here no distinction between legal and equitable mortgages as in English law, where the legal mortgage will always prevail against the equitable unless the holder of the legal has done or omitted to do something which prevents him in equity from asserting his paramount rights. The various classes of mortgages are merely described, and then as regards mortgage by way of deposit of title deeds, that is spoken of as a known method. That known method had consisted in applying the doctrine of English law that such deposit effected a mortgage good against the mortgagor, although no actual conveyance of the property had been made, may be taken as certain. That known method had consisted in applying the doctrine of English law that such deposit effected a mortgage good against the mortgagor, although no actual conveyance of the property had been made, may be taken as certain. Priority is dealt with in general terms by s. 48 " Where a person purports to create by transfer at different times rights in or over the same immovable property, and such rights cannot all exist or be exercised to their full extent together, each later created right shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created." This is what is expressed in the old maxim "Qui prior est tempore potior est jure." But priority is specifically dealt with in ss. 78, 79 and 80, which are as follows— "78.Where, through the fraud, misrepresentation or gross neglect of a prior mortgagee, another person has been induced to advance money on the security of the mortgaged property the prior mortgagee shall be postponed to the subsequent mortgagee. "79. If a mortgage made to secure future advances, the performance of an engagement or the balance of a running account, expresses the maximum to be secured thereby, a subsequent mortgage of the same property shall, if made with notice of the prior mortgage, be postponed to the prior mortgage in respect of all advances or debits not exceeding the maximum, though made or allowed with notice of the subsequent mortgage. "80. No mortgagee paying off a prior mortgage, whether with or without notice of an intermediate mortgage, shall thereby acquire any priority in respect of his original security. And, except in the ease provided for by s. 79, no mortgagee making a subsequent advance to the mortgagor, whether with or without notice of an intermediate mortgage, shall thereby acquire any priority in respect of his security for such subsequent advance.” Now upon the facts set forth the learned District Judge in appeal No. 148 of 1920 thought that two points and two points only arose (1.) whether the registration of the respondents mortgage was ipso facto notice to the bank, thus preventing the bank from making further advances upon the doctrine of Hopkinson v. Rolt (9H. L. C. 514.) ; and (2.) whether the fact that the respondents in taking the mortgage did not ask for the title deeds, brought into play the provisions of s. 78. He decided the first question in the negative and the second in the affirmative. He then gave judgment in favour of the bank. He did not consider or discuss the effect of the concluding words of s. 80. In appeal No. 149 of 1920 he held that the two questions were the same. The first he decided in the same way, but the second he decided otherwise. He held that as the mortgaged lands were in the Law Rep. 50 Ind. App. 283 ( 1922- 1923) Imperial Bank of India V. U Rai Gyaw Thu and Company Limited 98 district where the concluding provision of s. 59 did not apply, the bank were themselves negligent in not inspecting the register before making further advances and that this negligence on their part precluded them from putting forward negligence on the respondents part under s. 78. He therefore preferred the respondents. Again he did not discuss s. 80. The appeal in No. 149 of 1920 came on before the appeal in No. 148 of 1920. In that appeal s. 80 was mentioned, but was dismissed with the remark that it did not in any way supersede s. 79, and the question to be decided was declared to be whether in the circumstances the Court could impute gross negligence to the respondents and whether such negligence was a proximate cause of the bank making further advances. The learned appeal judge who delivered the judgment then proceeded to consider the English decisions as to the necessity of a legal mortgagee requiring possession of the title deeds, without perhaps quite adverting to the fact that the question in England is not so much one of priority in time as of the possibility of an equitable mortgagee being allowed to prevail over a legal. Having come to the conclusion that in the English law there was no absolute necessity to require production of the deeds, he argued that the case became much stronger in the country where registration existed, and he, therefore, came to the conclusion that the omission in this case to ask for the title deeds was not negligence and dismissed the appeal. In appeal No. 148 of 1920 he held that as he had decided in appeal No. 149 of 1920, it followed that there was no negligence and preferred the respondents to all except the amount which represented the amount due to the bank before the date of the mortgage so far as not paid off. Before their Lordships the argument proceeded on somewhat different and broader lines. The respondents based their case entirely on the concluding words of s. 80. Applying these words they say the bank is a mortgagee who has made an advance subsequent to an intermediate mortgage and therefore as this is not a case falling within s. 79 they cannot obtain priority therefor. All the discussion as to what is and what is not notice becomes unnecessary. The law being as it stands s. 78 cannot have any application, because nothing done by them caused the bank to make the further advances. The appellants sought to rebut this argument in various ways. They first argued that the words of s. 80 “in the case mentioned in s. 79 " meant mortgages to secure further advances or the balance of a running account. Their Lordships cannot accept this argument. They think that the words of s. 79 mean that the mortgage there referred to must express a maximum. The words "to secure further advances, etc.," denominate the different classes of mortgages, but to bring them under s. 79 they must have the common feature of a maximum expressed. As no maximum was expressed in either of the two cases here, the exception in s. 80 cannot apply. The appellants then argued that when a mortgage was to secure further advances, any advance when made was not truly a subsequent advance. The words of the section, in their Lordships opinion, are destructive of this argument. "Subsequent" from the context must mean subsequent to the intermediate mortgage, and if that is so, then in the sense of the section an advance when made after another mortgage granted becomes a subsequent advance. It was then argued that the equitable mortgage effected by deposit of title deeds was not a mortgage in the sense of the Act and that consequently the priority sections had no application. This seems untenable in view of the words of s. 58 (a). It was then argued that the equitable mortgage effected by deposit of title deeds was not a mortgage in the sense of the Act and that consequently the priority sections had no application. This seems untenable in view of the words of s. 58 (a). Unless the deposit of title deeds effects the transfer of an interest in a specific immovable property for the purpose of securing the payment of money advanced or to be advanced, it is absolutely nothing at all. Further the concluding words of s. 59 actually use the word "mortgage" to denote the security effected by delivery of documents of title. The consideration, however, on which the appellants laid most stress was that it was evident that the Law Rep. 50 Ind. App. 283 ( 1922- 1923) Imperial Bank of India V. U Rai Gyaw Thu and Company Limited 99 Legislature wished to preserve the system of mortgaging by deposit of title deeds in the enumerated towns. Such mortgages are only really useful for the exigencies of business, especially in the timber and rice trades, where balances fluctuate from day to day. It would be impossible at each subsequent advance that there should be a search of registers, because the registers searched would be not only the registers in the town itself but all those where the security lands mentioned in the deposited title deeds might be situated, and the exigencies of business require immediate advances without a delay which might be of many days. Therefore it was pressed on their Lordships that they should give such an interpretation to the Act as would not defeat one of its avowed objects. Such considerations while founded on views as to business which are obviously of the greatest practical importance would, in their Lordships opinion, be rather arguments for the invocation of the Legislature than an incentive to the putting of a forced construction on sections of an Act which in themselves were, in their Lordships judgment, capable of only one interpretation. It may, however, be not amiss to point out that, in their Lordships view, the remedy is given in the Act itself, and that is by the insertion in the arrange ments for such mortgages of a maximum as indicated by s. 79. The insertion of such a maximum elides the result which otherwise would obtain in terms of the case of Hopkinson v. Rolt. (9H. The insertion of such a maximum elides the result which otherwise would obtain in terms of the case of Hopkinson v. Rolt. (9H. L. C. 514.) It is true that the subsequent mortgage must be made with notice of the prior mortgage which includes the maximum. But a case like the present, where the lender took the subsequent mortgage without asking for the title deeds, would be met by s. 3 of the Act, which provides "A person is said to have notice of a fact when he actually knows that fact, or when, but for wilful abstention from an inquiry or search which he ought to have made, or gross negligence, he would have known it....." Taking the case of appeal No. 148 of 1920 as the simpler, their Lordships would be prepared to hold that for a mortgagee taking a mortgage in a place where he knew that mortgages by deposit of title deeds were legal and usual and not to ascertain whether the title deeds were already pledged was such abstention from an inquiry which he ought to have made or such negligence as to infer notice in terms of the section. In the present case such a finding is unavailing, because s. 80, in saying " with or without notice," makes notice immaterial. But if there had been a maximum then the exception would have applied and the case would have fallen under s. 79. Appeal No. 148 of 1920 has been taken as the simpler case, because the dealings are all within the town, but in appeal No. 149 of 1920, in their Lordships judgment, the result would have been the same. No doubt each case must be judged of according to circumstances. In parts of India remote from the enumerated towns, it would be out of the question to hold that there was a necessary duty in taking a mortgage to insist on the production of the title deeds. Registration is sufficient protection. But here the transaction was in Akyab, and the respondents knew that a deposit of title deeds in Akyab might involve lands situate outside Akyab and not very far remote. Upon this view of s. 80, s. 78 does not admit of any application. The bank, who had no maximum expressed so as to get the benefit of s. 79, took the risk of there being an intermediate mortgage. Upon this view of s. 80, s. 78 does not admit of any application. The bank, who had no maximum expressed so as to get the benefit of s. 79, took the risk of there being an intermediate mortgage. Their further advances could not in any sense be said to have been induced by any action of the respondents. For the reasons above given their Lordships think, though on different grounds from that given by the learned judges below, that these appeals fail and they will humbly advise His Majesty accordingly. The appellants will pay the costs of the appeals. The respondents petition for special leave to cross-appeal will be formally dismissed and no costs in relation to it must be charged in the respondents bill.