Shiam Lal v. Bashir Khan — 1942 DIGILAW 7 (ALL)

JUDGMENT Allsop and Verma, JJ. - This is an appeal by the Plaintiffs in a suit for sale based on a deed of simple mortgage dated June 13, 1935 executed by the first Defendant, Bashir Khan, in favour of the Plaintiffs for a principal sum of Rs. 11,000. The amount claimed in the suit was Rs. 12,492. The Court below has reduced the interest and has decreed the suit for the recovery of Rs. 8,156 only on the ground that the contesting Defendants were entitled to claim reduction of interest under the provisions of Section 30 of the United Provinces Agriculturists' Relief Act (No. XXVII of 1934). It has also directed that future interest shall run in accordance with the provisions of the said Act. 2. The facts material to the only point which arises for consideration are these. On March 6, 1930, one Shaft Khan, who was the owner of certain house property in the city of Agra, executed a deed of simple mortgage in favour of the present Appellants hypothecating that house property. The sum of money borrowed by Shaft was Rs. 10,000. The property aforesaid was sold on September 11, 1331, in execution of a money decree passed against Shafi and was purchased by one Munir Khan, who thus became the owner of the property subject to the encumbrance which had been created on March 6, 1930. On June 13, 1935, Munir sold the property for Rs. 16 000 to the first Defendant, Bashir Khan and out of the sale consideration, left a sum of Rs. 13,900 with Bashir for payment to the mortgagees, namely, the Appellants before us Bashir paid a sum of Rs. 2,900 to the Appellants and for the balance, Rs. 11,000, gave a mortgage to the Appellants over the property purchased by him from Munir. This deed of mortgage was executed on the same day on which the sale-deed by Munir in favour of Bashir was executed, namely, June 13, 1935. The interest which was agreed upon between Bashir and the Appellants was 9 per cent per annum compound-able every three months. The second Defendant, Shiva Narain is a subsequent mortgagee of the property in question by virtue of a deed and mortgage executed in his favour by Bashir on December 4, 1936. Defendant No. 3 has purchased the property in execution of a decree and is now its owner. 3. The second Defendant, Shiva Narain is a subsequent mortgagee of the property in question by virtue of a deed and mortgage executed in his favour by Bashir on December 4, 1936. Defendant No. 3 has purchased the property in execution of a decree and is now its owner. 3. The suit was contested by the second and the third Defendants who raised a variety of pleas. The only pleas with which we are now concerned are those covered by issue 5-- Is the rate of interest claimed by the Plaintiffs high and unreasonable? and by issue 6-- Was the mortgagor an 'agriculturist' and the Plaintiffs a creditor under the Agriculturists' Relief Act? If so, did the Plaintiffs fail to keep and supply correct accounts? If so, how does it affect the suit? 4. The Court below did not record the finding on issue No. 5 on the ground that it had come to the conclusion that the Agriculturists' Relief Act applied and that the interest would have to be reduced in accordance with the provisions of that Act. Under issue No. 6, it was found that Shaft, the original owner of the property, was an 'agriculturist' but that Munir and Bashir were not 'agriculturists'. It may be mentioned that the contesting Defendants, namely, Defendants 2 and 3, did not claim to be 'agriculturists' themselves but based their claim for relief on the ground that Shaft, Munir and Bashir had all been 'agriculturists' and that the contesting Defendants were consequently entitled to claim the benefits which the Agriculturists' Relief Act conferred upon 'agriculturists'. The Court below further held that the contesting Defendants were not entitled to ask for instalments u/s 3 of the Act. It was also held that the Plaintiffs were not bound to maintain and supply accounts u/s 32 of the Act. With regard to the claim for reduction of interest u/s 30, the Court held that, although the contesting Defendants themselves were not 'agriculturists' and although Bashir and Munir were not proved to have been 'agriculturists', the contesting Defendants were entitled to reduction of interest in accordance with the provisions of that section. The appeal is against that decision. There is also a cross-objection by the second Defendant in respect of costs. 5. The appeal is against that decision. There is also a cross-objection by the second Defendant in respect of costs. 5. The Court below has given the following reasons for holding that the second and third Defendants were entitled to claim reduction of interest: The Plaintiffs, in case of necessity, can fall back upon the mortgage dated March 6, 1930 and can use it as a shield in their favour. The rights between the mortgagor and the mortgagee are reciprocal. The Defendants can also trace the origin of the debt in their favour. The bond in question was nothing but a partial renewal of the bond dated March 6, 1930. 6. The learned Judge relied on the ruling in Bireshwar Das Bapuli v. Uma Kant Panday 1937 AWR 387. 7. Learned Counsel for the Plaintiffs-Appellants has contended that the Court below has erred in holding that, on the facts found, the second and the third Defendants could claim the right to have interest reduced in accordance with the provisions of Section 30 of the Agriculturists' Relief Act. He has pointed out that the suit is not based on the mortgage deed of March 6, 1930 and has urged that the fact that Shaft was an 'agriculturist' can therefore be of no assistance whatsoever to the contesting Defendants in this case. His contention is that the mortgage of June 13, 1935, which is the basis of the suit, was an entirely new mortgage and that it was not a renewal of the mortgage of March 6, 1930. He has urged that the suit is not for the recovery of the loan which had been advanced to Shaft on March 6, 1930, but for the recovery of the loan which in the eyes of the law, the Plaintiffs advanced to Bashir on June 13, 1935 and has contended that here there is no question of the Plaintiffs being able to fall back on the mortgage of March 6, 1930, or to use it as a shield, nor of the Defendants being able to trace the origin of the debt as the origin of the debt in this case was on June 13, 1935 and there was nothing to trace. He has argued that, the suit not being on the basis of the mortgage of March 6, 1930, or a renewal thereof, or for the recovery of the loan advanced to Shaft on March 6, 1930, the decisions in cases of the type of Bireshwar Das Bapuli v. Uma Kant Panday 1937 AWR 387 and Misri Lal v. Alexander Gardner 1936 AWR 682, are not applicable. In our judgment the contention of Learned Counsel for the Plaintiff-Appellants is well-founded. The suit not being based on the mortgage deed executed by Shaft on March 6, 1930, the fact that Shaft was an 'agriculturist' cannot in our opinion be of any avail to the contesting Defendants. We agree with the contention of the Appellants' Learned Counsel that the suit is for the recovery of a totally different loan, namely, a loan which the Plaintiffs must be held to have (sic) to Bashir on June 13, 1935. In our opinion the reasons given by the Court below for deciding against the Plaintiffs in this point are not sound. 8. Learned Counsel for the second Defendant, who alone is represented before us, has referred to the case of Faiyaz Ahmad v. Jamal Uddin 1940 AWR (HC) 257. The facts of that case, however, were entirely different and the case is not applicable to the facts of the case before us. 9. We have, for the reasons given above, come to the conclusion that the decision of the Court below that the contesting Defendants were entitled to reduction of interest under the provisions of Section 30 of the U.P. Agriculturists' Relief Act must be set aside. 10. We may mention that Learned Counsel for the Respondents challenged the correctness of the finding of the Court below that Bashir was not an 'agriculturist', at any rate, at the relevant date namely, June 13, 1935. We have examined the evidence and have come to the conclusion that the finding of the Court below is perfectly correct. 11. The next and last argument of the Learned Counsel for the Respondents is that, the Court below not having decided issue No. 5, it was necessary to call for a finding on that issue. We are unable to accept this contention. The rate of interest mentioned in the mortgage deed in suit is less the in 12 per cent per annum. We are unable to accept this contention. The rate of interest mentioned in the mortgage deed in suit is less the in 12 per cent per annum. Further, it is not shown that the amount of interest, on calculation at the rate given in the deed, would come within the rule laid down in Clause (ii) of the first Proviso added to the Usurious Loans Act of 1918 by the Usurious Loans (U.P. Amendment) Act, XXIII of 1940. It is not denied that the Usurious Loans Act of 1918, as it stood before the amendment made by the Provincial Legislature, would not apply to the transaction in question. Learned Counsel for the Respondents has entirely failed to show that the Provisos added by the amending Act mentioned above have any application to it. It is, therefore, not necessary to remand the case for a finding on issue No. 5. 12. We have heard Learned Counsel for the Respondents on the cross-objections. In our opinion the order of the Court below as to the costs is perfectly correct. 13. The result is that we allow the appeal, modify the decree of the Court below and decree the suit in full. Let a fresh preliminary decree under Order 34, Rule 4 of the CPC be prepared. The Defendants shall have time to pay the amount due to the Plaintiffs up to July 18, 1942. The Appellants are entitled to their costs in both Courts. The cross-objections are dismissed with costs.