Lalji Singh v. Lakshmi Narain — 1945 DIGILAW 228 (ALL)

JUDGMENT Misra and Kaul, JJ. - These two matters (miscellaneous Appeal No. 25 of 1943 and Revision Application No. 43 of No. 1943), are connected as they arise out of the same decision and may be conveniently disposed of by one common judgment. 2. The material facts are as follows : One Darbari Lal was the owner of a 2 annas share fn village Amkherwa and a 2 annas 8 pies share in village Gunwan. On the 4th of November, 1890, he created a possessory mortgage over this property in favour of talk Pd. for a consideration of Rs. 1,500. On the 12th of February, 1895, Kalka Prasad transferred the mortgagee rights under the deed of the 4th of November, 1890, in favour of Balbhaddar Singh, father of Thakur Lalji Singh, who is the appellant before us. On the 15th of September, 918, Darbari Lal under a deed of gift transferred the mortgaged property in favour of Lakshmi Naraian and Jamuna Prasad respondents in the present appeal On the 23rd of June, 1922, Lakshmi Narain and Jamuna Piasad executed two deeds in favour of Lalji Singh: (1) a possessory mortgage in lieu of Rs. 1,300 on security of the 2 annas 8 pies share in village Gunwan, and (2) a simple mortgage for a consideration of Rs. 375 on the security of the 2 an Das share in village Amkherwa. 3. It was not disputed before us that except for a fresh advance of Rs. 175 (out of Rs. 375 for which this simple mortgage was given) these two mortgages were given for payment of the previous mort- gage debt of the 4th November, 1890. On the 9th September, 1920, Lalji Singh instituted a suit on the basis of his deed of simple mortgage for recovered of Rs. 375 and interest. Before this suit was decided Lakshmi Narain and Jamuna Prasad filed a suit on the 16th of February, 1921. u/s 33 of the Agriculturists' Relief Act and Section 7 of the U.P. Debt Redemption Act for accounts relating to the two deeds of the 23rd June, 1922. It was contended on their behalf that they were agriculturists and entitled to the benefit of the provisions of both the Acts. u/s 33 of the Agriculturists' Relief Act and Section 7 of the U.P. Debt Redemption Act for accounts relating to the two deeds of the 23rd June, 1922. It was contended on their behalf that they were agriculturists and entitled to the benefit of the provisions of both the Acts. It was further pleaded that inasmuch as the mortgages of the 23rd June, 1922, were given in Hue of the original mortgage of the 4th of November, 1890 (except for a fresh advance of Rs. 175) the whole transaction should be reopened and accounts settled between the parties on that basis. 4. Both these suits were consolidated and heard together. It was urged on behalf of Lalji Singh, in reply to the mortgagor's contention, that under the deed of gift dated the 15th of September, 1918, the liability for repayment of Darbari Lai's debt had been transferred to the donee of the mortgaged lands and so in view of the provisions of Section 2 (9) of the U.P. Debt Redemption Act the debt in question was not a loan within the meaning of that expression as used in the said Act. 5. The trial Court accepted Lalji Singh's contention and held that the U.P. Debt Redemption Act did not apply to the cases before it. On appeal by Lakshmi Narain and Jamuna Prasad the learned District Judge disagreeing with the trial Court held that the liability for repayment of the debt not having been transferred by a contract, but under a deed of gift, the transaction was a loan within the meaning of Act XIII of 1940. 6. He remanded the case accordingly for retrial in the length *.of the conclusion arrived at by him. Dissatisfied with this decision Lalji Singh has preferred a second appeal in his own suit and a revision petition in the suit u/s 33 of the Agriculturists' Relief Act. 7. The only point argued before us was whether on a proper interpretation of Section 2 (9) of the U.P. Debt Redemption Act the Debt in question fell within the category of the term "loan" as used in the said Act. 7. The only point argued before us was whether on a proper interpretation of Section 2 (9) of the U.P. Debt Redemption Act the Debt in question fell within the category of the term "loan" as used in the said Act. Section 2 (9) reads as follows : In this Act unless there is anything repugnant in the subject or context, 'loan' means an advance in cash or kind male before the first day of June, 1940, recoverable from an agriculturist or a work- man or from any such person and other persons jointly or from the property of an agriculturist or workman and includes any transaction which in substance amounts to such advance, but does not include an advance the liability for the repayment of which has, by a contract with the borrower or his heir or successor, or by sale in execution of a decree, been transferred to another person.... 8. It will be seen that there is attached to the definition of the word "loan" what may be called an exception. An "advance", the liability for the repayment of which has, by a contract with the borrower or his heir or successor, or by sale in execution of a decree, been transferred to another per- son is not a loan for the purposes of this Act. The language of this exception though it cannot be said to be involved, raises some questions which are not free from difficulty. It contemplates two classes of cases : (1) Where the liability for the repayment of the advance has, by sale in execution of a decree, been transferred to an- other person (to a person other than the borrower); and (2) where the liability for the repayment of the advance has, by a contract with the borrower or his heir or successor, been transferred to another person. 9. It is difficult to conceive of a case in which, by sale of property in execution of a decree, the liability to pay the debt, to which the property was subject, is transferred to another person unless it is intended to say that a person, other than the borrower has become, on account of his purchase of the property burdened with the debt, interested (with a view to save the property from being sold for satisfaction of the debt) in repayment of the encumbrance. It is clear, however, from the language used that by the expression, "the liability for repayment of which...has been transferred to another person" the legislature intended to refer to the liability of the purchaser at an execution sale of a property burdened with an encumbrance to satisfy that encumbrance. It can have no reference, though the language might possibly suggest a different interference, to any personal liability of the purchaser of property burdened with a debt at a Court auction held in execution of a decree. It is the same with regard to either of the two classes of cases covered by :the exception. No distinction can be drawn between a case where liability for repayment has been transferred to another person by a contract and a case where the transfer of liability results from a sale in execution of a decree. 10. Having thus cleared the ground, we may consider whether the exception would cover a case where a person acquires under a deed of gift a property burdened with a debt. Was it intended by the legislature that a donee should not be given the benefit of the provisions of this Act ? 11. We may observe that the language employed by the legislature in framing the exception is not happy. Just as observed in the case of property burdened with a debt sold in execution of a decree, it is difficult to conceive of a case in which, unless the creditor is also a party to the transaction, a contract between the borrower and an- other person can have result of transferring the borrower's liability to such other per- son. It is possible, as is sometimes the case, that by a contract with the borrower another person may undertake to pay the debt or by operation of law may become responsible for its payment. The liability of the original borrower will nevertheless continue. It is further clear that the term "contract" is used here in a wide sense, including conveyances. Nor is (his unusual, for, as observed by Sir H.S. Gour in his Introduction to the Law of Transfer in British India, 6th Edn. Vol. I, page cxxviii, paragraph 62, By Section i (Transfer of Property Act) the sections which relate to contracts are to be taken as a part of the Indian Contract Act and those relating to registration as supplemental to the Indian Registration Act. Vol. I, page cxxviii, paragraph 62, By Section i (Transfer of Property Act) the sections which relate to contracts are to be taken as a part of the Indian Contract Act and those relating to registration as supplemental to the Indian Registration Act. All contracts of transfer would thus be governed by the Contract Act.... A transfer whether by sale, exchange, lease, mort- gage, or assignment would thus accordion to the Contract Act, be clearly a contract. But a transfer by gift would not be a contract, in this sense. 12. It was argued before us by the learned Counsel for the appellant that by accepting a gift of the property burdened with a debt' from Darbari Lal Lakshmi Narain and Jamuna Prasad impliedly agreed to pay the debt to which the property was subject and accordingly their case would be covered by the exception contained in the. term "loan" as given in Section (2) (9). 13. Reliance was in this connection placed on a single Judge decision of this Court in Pirthi Nath v. Raj Dutt 1914 O A 87 : AWK (C C) 87 : OWN 144 where it was held by one of us that the word "contract" occurring in the definition of "loan" in Section 2 (9) of the U.P. Debt Redemption Act does not confine itself to an ex- press contract but includes also a contract which is implied by the terms of the deed or by law. In Pirthi Nath's case property which was subject to a mortgage was Fold and money was; left with the vendee to pay oft the debt, it was held that the vendee was not entitled to the benefit of the U.P. Debt Redemption Act. It was observed that in order to exclude an advance from the definition of "loan" as contemplated by the U.P. Debt Redemption Act, the liability for its repayment should have been transferred to another person by a contract between that person and the borrower or his heirs or successors or by sile in execution of a decree. It was argued that the liability for the repayment of the debt not being transferred by express contract, but only by an implied contract, the exception in Section 2 (')) could not apply to such a case as it was applicable only to cases where the liability for repayment was transferred by express contract. It was argued that the liability for the repayment of the debt not being transferred by express contract, but only by an implied contract, the exception in Section 2 (')) could not apply to such a case as it was applicable only to cases where the liability for repayment was transferred by express contract. This contention was negatived and it was held that the term "contract" would include cases of ex- press as well as implied contracts. The appellant can derive no help from this case. It was not a case of a gift. A contract, according to the Indian Contract Act, is an agreement enforceable by law. Every promise and every set of promises, forming the consideration for each other, is an agreement. One essential requisite of a contract is consideration, and this is what, apart from other things, distinguishes it from a gift. 14. We are not prepared to accept the argument advanced by the learned Counsel for the appellant that a person accepting a gift of property burdened with a debt impliedly contracts to repay the debt. Contract is a term of aft a_-,d has a distinct meaning when used in an Act of Legislature. It is essentially different from a gift and the considerations which apply to a contract do not necessarily apply to a gift. It may be that by operation or law a person, by accepting a gift of property which is burdened with a debt, may become liable to pay the debt. It cannot, however, be said that in such a case his liability arises out of a contract. 15. It was he'd by a Bench of the Allahabad High Court, (Allsop and Hamilton JJ.) in Kr. Aittar Singh Vs. Mahabir Pal Singh and Others, AIR 1944 All 213 , that the term "contract" as used in Section 2 (9) of the U.P. Debt Redemption Act cannot include any transfer which does not involve the payment of consideration. A gift cannot, therefore, be included among the transactions which operate to transfer the liability for the repayment of an advance within the terms of the definition "loan" in Section 2 (9). In that case the donee of property subject to an encumbrance was held entitled to claim the advantage of the provisions of Section 17 of Act XIll of 1940. In that case the donee of property subject to an encumbrance was held entitled to claim the advantage of the provisions of Section 17 of Act XIll of 1940. There is a decision of this Court which, though not given in a case arising out of a deed of gift, leads to the same inference. It was held in the else of Ram Prasad Singh v. Bichcha Singh, (1945 O. A., 184) that the word "contract" in Section 2 (9) must be taken to signify a transfer for valuable consideration. It was further held in that case .that it was immaterial whether or not the transfer by which the obligation to repay the advance devolved upon another person contained any express reference to the liability. Section 2 (9) is clear that the transfer of liability for repayment of a debt from the borrower to another person shall have the effect of taking the case out of the definition of the word "loan" only if such transfer is the result of a contract. Thus before a party can rely upon the exception contained in Section 2 (9) it must be shown that the transfer of liability for repayment from the borrower to another person flows out of a contract. Unless there was a contract which had the effect, either by reason of its terms, or by operation of law, to transfer the '-liability from the borrower to another person, the advance would continue to be a "loan". We have no doubt, therefore, that the donee of a properly subject to an encumbrance, provided he fulfils other conditions, is entitled to the benefit of the proviso's of the U.P. Debt' Redemption Act, there being no coat act, express or implied to repay the debt. The appeal and the revision petition must, therefore stand dismissed. We order accordingly. In each case Thakur Lalji Singh shall pay the opposite party's costs.