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2004 DIGILAW 1257 (PNJ)

Ved Parkash Sarogi v. Oriental Bank Of Commerce

2004-11-17

HEMANT GUPTA

body2004
Judgment Hemant Gupta, J. 1. Defendants No. 3 to 6 are in second appeal aggrieved against the judgment and decree passed by the courts below arising out of a suit for recovery of Rs. 1,01,616.90 paise filed by respondent No. 1 herein. 2. Defendant No. 2 Ajit Singh sought loan from the plaintiff bank on 13.12.1966. The plaintiff bank agreed to grant certain credit facilities and thereafter defendant Nos. 1 and 2 received a sum of Rs. 40,000/- on 24.1.1967. The said defendants also availed cash credit facility against the stock from Patel Nagar Branch of the bank from 27.1.1967 and a cash credit facility against bills w.e.f. 11.1.1967. Thus, three different accounts regarding 3 facilities were opened by defendants No. 1 and 2 at Patel Nagar Branch of the plaintiff bank. Said defendants were granted loan on their offering security of immovable property by deposit of title deeds. The documents were deposited with the plaintiff bank with intent to create a security on the said immovable property for the repayment of the loan sanctioned by the plaintiff bank. A memorandum to that effect was also executed by defendant No. 2 Ajit Singh on 24.1.1967. The accounts of defendants No. 1 and 2 were subsequently transferred to Kirti Nagar Branch of the plaintiff bank where the defendants No. 1 and 2 further availed cash credit facilities by hypothecation of stock to the extent of Rs. 30,000/- and also executed additional documents, but the defendants No. 1 and 2 failed to honour their commitments and to repay the amount due in their respective accounts. 3. It was further pointed out that a registered lease deed dated 30.1.1970 was executed by defendants No. 1 and 2 in favour of defendant No. 3 in contravention of the terms of agreement between defendants No. 1 and 2 and the plaintiff bank. The said defendants also executed a registered sale deed dated 30.1.1970 in favour of defendant No. 4. The lease hold rights were further sold by defendant No. 3 in favour of defendant No. 5 on 21.8.1970 whereas defendant No. 4 executed sale deed in respect of the said land in favour of defendant No. 6. It is, thus, pleaded that the plaintiff bank has charge on the said property of defendants No. 1 and 2 and the transactions of lease and sale would not effect the rights of the Bank. 4. It is, thus, pleaded that the plaintiff bank has charge on the said property of defendants No. 1 and 2 and the transactions of lease and sale would not effect the rights of the Bank. 4. Both the courts have decreed the suit holding that the property which was the subject-matter of the sale and lease is liable for the payment of amount outstanding due against Ajit Singh. Still aggrieved, the defendants are in second appeal wherein the plaintiff has raised the following substantial question of in the grounds of appeal: Whether the vendee accepting transfer of agricultural land on faith of entries in favour of his transferor in the records of rights is protected under Section 41 of the Transfer of Property Act? 5. Before adverting to the contention raised by the learned Counsel for the appellants in the second appeal, a brief resume of the evidence relevant for the arguments raised by the learned Counsel for the appellants be noticed. Defendant No. 3 has examined himself as D.W.I and relied upon the sale deeds. Ex.D. 1 and Ex.D. 2, he deposed that he visited the land in dispute before the purchase and found that there was no communication in the forms of board or otherwise showing that the said land is hypothecated with anyone. It is also stated by him that he has not personally verified about the title of Ajit Singh but inquiry was made on his behalf by Sukh Ram from village lamberdar and also from the office of the Sub-Registrar. 6. Learned Counsel for the appellants relied upon recitals in the sale deed Ex.D2 dated 30.1.1970 wherein it is recited that the sale deed in favour of Ajit Singh has been lost and a copy thereof would be given to the vendee. Subhash Sahni. the purchaser of the lease hold rights from Ved Parkash defendant No. 3 has appeared as DW2 and relied upon the documents of purchase of the lease holding rights. 7. The plaintiff has produced documents inter alia registered mortgage deed Ex.P. 34 of the property in dispute in favour of Laxmi Commercial Bank, New Delhi dated 27.7.1966. The said mortgage deed was redeemed which fact is evident from the endorsement at the back of mortgage deed dated 18.3.1967 supported by communication by the Manager of Laxmi Commercial Bank to Sub-Registrar, Ballabgarh Sated 18.3.1967 Ex. P. 33. The said mortgage deed was redeemed which fact is evident from the endorsement at the back of mortgage deed dated 18.3.1967 supported by communication by the Manager of Laxmi Commercial Bank to Sub-Registrar, Ballabgarh Sated 18.3.1967 Ex. P. 33. The plaintiff has also produced sale deed dated 5.4.1963, Ex. P. 32 vide which Ajit Singh purchased the land in dispute. 8. The learned trial court found that there is nothing on record to suggest that a proper, due and bona fide inquiry was ever made by defendants No. 3 and 4 about the loss of original title deeds. No inquiry has been made in respect of any report made with the police by Ajit Singh nor any inquiry has been made as to whether any proclamation or publication has been made asking the public at large to return the documents to Ajit Singh. The learned trial court concluded that no body went to the office of Sub-Registrar to verify the title or the defect in the title of Ajit Singh. Had proper inquiries made they would not have missed the existence of a mortgage deed executed by Ajit Singh in favour of Laxmi Commercial Bank on 27.7.1966. The said deed along with memorandum of release was in possession of the plaintiff bank. It has also found that since redemption of the mortgage in favour of Laxmi Commercial bank was made at the back of the mortgage deed, therefore, the record of the Sub-Registrar would have indicated that this mortgage subsisting in favour of Laxmi Commercial Bank and thus should have put defendants No. 3 and 4 on guard and they should have asked for the original title deeds or for mortgage deed before settling the bargain of purchase. The learned trial court found that defendants No. 3 and 4 willfully abstained from inquiry or search which they ought to have made and they grossly neglected to enquire about the loss of original title deeds by Ajit Singh. The learned trial court concluded that though defendants No. 3 and 4 are purchasers of the land for valuable consideration but they are not bona fide purchasers and they had notice of the defect in the title of Ajit Singh. The learned trial court concluded that though defendants No. 3 and 4 are purchasers of the land for valuable consideration but they are not bona fide purchasers and they had notice of the defect in the title of Ajit Singh. Similarly subsequent sales in favour of defendants No. 5 and 6 was also held to be purchase for valuable consideration but had also notice of the defect of the title of defendants No. 3 and 4. In appeal, the findings were affirmed. 9. The learned Counsel for the appellants argued that the revenue record was verified by an agent of the defendant and since there is no entry of mortgage in favour of the plaintiff bank, therefore, the defendants are the purchasers of the property without notice of the mortgage. Strong reliance is placed upon paras 7.18 and 7.56 of the Punjab Land Records Manual wherein it is contemplated that all mortgages are required to be entered in the mutation register. Said provision further contemplate that all mutations upon which final orders have been passed up to 15th June, are required to be incorporated in the jamabandi. Therefore, it is contended that since the mutation of mortgage was not entered in the revenue record which was an obligation on the mortgagee, therefore, the mortgagee cannot enforce mortgage against the purchaser without notice of the said mortgage. Reliance was also placed upon a Division Bench judgment of Lahore High Court reported as Arur Singh v. Mr. Santi and Ors. A.I.R. 1936 Lahore 405 and upon a Full Bench judgment of Lahore High Court in Shamsher Chand v. Bukhshi Mehar Chand and Ors. A.I.R. (34) 1947 Lahore 147. 10. The learned Counsel for the appellants has further argued that there was no communication of mortgage at the site as there was no display of any notice regarding the mortgage, which is normal practice and thus, neither in the revenue record nor at the site in dispute there was any reference to mortgage in favour of the plaintiff bank. Therefore, the sale and lease in favour of the appellants is protected as such sale alienations are after taking into consideration reasonable care and are in good faith. Reliance is placed upon a Division Bench judgment of Andhra Pradesh High Court reported as Kanigalla Prakasa Rao v. Nanduri Ramakrishna Rao and Ors. 11. Therefore, the sale and lease in favour of the appellants is protected as such sale alienations are after taking into consideration reasonable care and are in good faith. Reliance is placed upon a Division Bench judgment of Andhra Pradesh High Court reported as Kanigalla Prakasa Rao v. Nanduri Ramakrishna Rao and Ors. 11. The learned Counsel for the appellants further argued that the judgments referred to by the learned trial court i.e. Ragu Nath v. Mansa and Anr. (1962) 64 P.L.R. 230 and Waryam Singh and Ors. v. Ujagar Singh and Ors. 1973 P.L.J. 458. in fact. support the appellants as both the cases are of a registered document, whereas in the present case, the mortgage in favour of the plaintiff bank is not by way of registered document. Still further, learned Counsel argued that Mr. Ghidam Fatima v. Mt. Gopal Devi and Anr. A.I.R. 1940 Lahore 269 has been misread by the learned first Appellate Court. 12. After hearing the learned Counsel for the appellants, however, I do not find any substantial question of law arises for consideration which may warrant interference by this Court in the second appeal. 13. Ajit Singh, the vendor of the appellants have purchased the property in dispute on 5.4.1963 vide sale deed Ex. P. 32. The said property was mortgaged in favour of the plaintiff bank in January, 1967 whereas the defendant appellants are claiming interest in the property on the basis of documents executed in the month of January. 1970 and thereafter. It is the case of the appellants that Ajit Singh represented that the original sale deed has lost, which representation was believed to be true by the appellants. 14. Such representation of Ajit Singh though recited in the sale deed Ex. D. 2 is a self-serving statement made by the borrower. Such statement cannot be used against the plaintiff bank. Ajit Singh, or his legal representatives have not been examined to prove the factum of representation so as to provide an opportunity of cross-examination to the plaintiff as well. Therefore, mere recital in the sale deed Ex. D. 2 that the title deed has been lost is not sufficient to prove the loss of document so as to defeat the rights of the plaintiff bank. 15. Still further, Ajit Singh has mortgaged the property, in dispute in favour of Laxmi Commercial Bank vide Ex. P. 34. Therefore, mere recital in the sale deed Ex. D. 2 that the title deed has been lost is not sufficient to prove the loss of document so as to defeat the rights of the plaintiff bank. 15. Still further, Ajit Singh has mortgaged the property, in dispute in favour of Laxmi Commercial Bank vide Ex. P. 34. Though the mortgage was by a registered document but the redemption was not by registered document but by virtue of an endorsement at the back of the mortgage deed. The mortgage containing endorsement was produced in evidence by the plaintiff bank along with the letter. The plaintiff produced the communication of the Manager, Laxmi Commercial Bank in respect of the redemption of mortgage as well. The defendants have not produced any evidence to the effect that they were in the knowledge of mortgage of land in favour of Laxmi Commercial Bank and its redemption. There is no evidence that factum of redemption of land was noticed by the purchasers. Therefore, had reasonable care would have been taken by the defendants, they would have taken to know of a registered mortgage deed in favour of Laxmi Commercial Bank which would have put the defendants to insist upon the documents of title and that property is free from encumbrances. Therefore, it cannot be said that the defendants have taken reasonable care before purchase of the property in the year 1970. 16. In Ann- Singhs case (supra) the Division Bench of Lahore High Court has held that in the Punjab, the transfers of land are oral and therefore, more importance is attached to the revenue records. The argument raised by the learned Counsel for the appellants was that since the mortgage was not by way of a registered instrument, therefore, the entries in the revenue record had a paramount importance. But the same argument is not sustainable in law. The defendants could find out charge on the property, had the defendants taken reasonable care. There was a registered mortgage deed and there is no proof of redemption available in the revenue record. Still further, there is no reasonable basis on the record that the alleged representation of Ajit Singh that original title deeds had been lost could be believed by any reasonable person of ordinary prudence. The purchase by Ajit Singh was only 7 year earlier. Thereafter, there was a registered mortgage deed. Still further, there is no reasonable basis on the record that the alleged representation of Ajit Singh that original title deeds had been lost could be believed by any reasonable person of ordinary prudence. The purchase by Ajit Singh was only 7 year earlier. Thereafter, there was a registered mortgage deed. Apart from the bald recital in the sale deed, there is no corroborative1 evidence of loss of title deeds. There is nothing on record that the defendants sought police record, publication in the newspaper or otherwise verified the alleged representation of loss of the title deeds. Therefore, it cannot be said that the appellants could not find out about the encumbrance by exercising due diligence. Still further, the judgment relied upon pertain to the period when Section 54 of the Transfer of Property Act was not extended to the State of Punjab. 17. The Full Bench judgment in Shamsher Chands case (supra) is again not helpful to he case of the appellants. That was a case where R grand-son of a legatee under a will was not aware of the will whereas the mutation of the estate of L was sanctioned in favour of his three sons. At the time of death of L, R was minor and after attaining majority, he filed a suit to avoid the sale effected by one of the sons of L. It was held that in order to deprive a real owner of his rights in immovable property, it must be established that he has given consent express or implied to another to represent himself as owner of the property. What has been held is that before such consent could be inferred it must be proved that the person giving consent was aware of his right, title or interest in the property and that in respect of that knowledge he gave his consent. Said judgment is clearly distinguishable. It was held in the said case that a vendee, who accepted a transfer on the faith of entries in the revenue records in favour of a transferor, was protected under Section 41 of the Transfer of Property Act if there was no circumstances which should have led him to go behind the revenue records and make further inquiry. (emphasis supplied). 18. (emphasis supplied). 18. In the present case Ajit Singh has already mortgaged his property with another bank but made false representation that the title deeds have been lost and still the defendants proceeded to purchase the property. Such representation cannot affect the rights of third party to the transaction of sale i.e. the bank. 19. The argument that the judgment in Raghu Naths case (supra) supports the case of the appellants is again not tenable in law. In the said case, it was held that the rule embodied in Section 41 of the Transfer of Property Act appears to be an exception to the recognised principle of law that no man can transfer to another a right or title greater than what he himself possess. The exception embodied in the Section is a form of equitable doctrine of estoppel. It was held that in order to attract the rule of estoppel it must be shown inter alia, that the ostensible owner has been enabled to possess the indicia of ownership by the express or implied consent of the real owner and further that the trans-free has, after taking reasonable care to ascertain that the transferor has the power to make the transfer, acted in food faith. It has been further held that mere inactivity on the part of the person interested without something more is not enough, though in certain circumstances where activity is called for, inactivity may legitimately amount to the requisite representation attracting the doctrine of estoppel. Relevant part of the judgment is reproduced as under:- 11. It is desirable here to examine as to what are the essential requisites for attracting the principle undertaking Section 41 of the Transfer of Property Act. This section is in the following terms:- 41. Where with the consent express or implied, of the persons, interested in immovable property, a person is the ostensible owner of such property, and transfers the same for consideration, the transfer shall not be voidable on the ground that the transferor was not authorised to make it; provided that the transferee, taking reasonable care to ascertain that the transferor had power to make the transfer, has acted in good faith. The rule embodied in this section appears to me to be an exception to the recognised principle of law that no man can transfer to another a right or title greater than what he himself possesses. The rule embodied in this section appears to me to be an exception to the recognised principle of law that no man can transfer to another a right or title greater than what he himself possesses. The same principle of law is expressed by the maxim:- He gives not who hath not. The exception embodied in Section 41, is in its language shows, a form of equitable doctrine of estoppel. It is not a new rule of law but an already existing equitable rule raised to the status of the statutory mandate in the territories, where the Transfer of Property Act is in force. In other places applicability of the principle embodied in this section still depends on considerations of justice equity and good conscience. 12. Now to attract, the rule of estoppel contained in this section it must be shown, inter alia, that the ostensible owner has been enabled to possess the indicia of ownership by the express or implied consent of the real owner, and further that the transferee has, after taking reasonable care to ascertain that the transferor has the power to make the transfer, acted in good faith. As observed by this Court in Gurbinder Singhs case mere inactivity on the part of the person interested without something more is not enough, though, in my opinion, in certain circumstances where activity is called for. inactivity may legimately amount to the requisite representation, attracting the doctrine of estoppel embodied in the section in question. As a matter of fact, human activities are so varied and unpredictable that it must always remain a question to be determined in the circumstances of each case as to whether or not inactivity on the part of the person interested attracted the rule of estoppel contained in Section 41. 20. A perusal of the aforesaid judgment would show that it is a question to be determined in the circumstances of each case whether or not inactivity on the part of the person interested attracts the rule of estoppel contained in Section 41. As per the facts discussed above, the appellants cannot be said to have taken reasonable care so as to attract the rule of estoppel against the plaintiff. 21. In Kanigalla Prakasa Raos case (supra) the equitable mortgage was created in favour of the bank though the title deeds were represented to have been lost. As per the facts discussed above, the appellants cannot be said to have taken reasonable care so as to attract the rule of estoppel against the plaintiff. 21. In Kanigalla Prakasa Raos case (supra) the equitable mortgage was created in favour of the bank though the title deeds were represented to have been lost. The court held that it was a valid mortgage. One of the factors which was taken into consideration was that the plaintiff gave an evasive answer when it was suggested that there was a board displayed by the bank on the property that the property was pledged to the bank It was found in that said case that the plaintiff was, in fact, aware of the subsisting prior equitable mortgage in favour of the bank therefore, no equity arose in favour of the plaintiff merely because the original sale deed was delivered to him at the time of equitable mortgage was created in his favour. Said judgment is not applicable to the facts of the present case. 22. The learned Counsel for the appellants has also referred to a Single Bench judgment of this Court in Amur Nath v. State of Punjab and Ors. 1992 P.L.J. 381. That was a case where the sale was effected even though the sale certificate expressly prohibited further sale within a period of 10 years. It was held that since the subsequent transfer is in violation of express stipulation, therefore, subsequent transfer was held to be not bona fide. The said case is not even remotely relevant to the present case. 23. Both the courts have decreed the suit and found that the defendant-appellants are not entitled to protection of alienations under Section 41 of the Transfer of Property Act. The findings are possible findings in law and do not call for any interference in second appeal. No substantial question of law arises. Therefore. I do not find any merit in the present appeal. The same is dismissed with no order as to costs.