Krishna Kishore Adhikary and Others vs The Kusunda Nyadi Collieries, Ltd.

Das, J.—On the 6th February 1901 the defendant No. 2 and the predecessors in interest of defendants Nos. 3 6 gave a mining lease in respect of 100 bighas of coal land in Kusunda to one Mr. Phillips on certain terms as to payment of minimum royalty and commission which are set out in the document creating the title in favour of Mr. Phillips. Mr. Phillips has subsequently conveyed his interest to the Kusunda Nyadi Collieries Ltd. and the Company is now liable to pay the minimum royalty and commission in respect of the lease to defendants Nos. 2 6. Defendants Nos. 2-6 borrowed various same of monies from Mr. Smith, who has been sited in the action as defendant No. 7, and on the 4th March 1908 the sum due and owing by defendants Nos. 2 6 to Mr. Smith amounted in all to Rs. 35,000. On the 24th March 1908, defendants Nos. 26 executed a document in favour of Mr. Smith which is the subject-matter of the dispute between the parties, The document is as follows: "This Jat meadi tamasuk is executed to the following effect: that we have borrowed already Rs. 30,000 from you, as per items noted herein below, and borrow Rs. 5,000 this day, in all Rs. 35,000. In order to pay off this sum without interest, we executed Jat meadi in respect of half of the commission on the underground coal of the 100 bighas of land, as described in the boundaries given below, within 12 annas of the entire Mauza Kusunda, appertaining to Parganna Jharia and Katras. * * * * * You shall continue to satisfy the sum borrowed, by realising the commission every month, from year to year from the ensuing month of April of the current year. You shall continue to realise half of the commission till that month of that year until which the entire amount is paid up. This Jat meadi commission shall continue to be realised by us directly from that month and that year on which your money will be paid up. You or your heirs or representative shall not be competent to raise any claim, plea objection to the same. If the income from the commission be stopped owing to the exhaustion of coal, or on any other ground, and if the entire amount due to you be not realised therefrom and something is left due, you shall not be competent to realise the same from our persons, or Other properties. You shall remain bound to give up the same." The question which we have to determine is, whether this document operated as a mortgage of Immovable property. If it did operate as a mortgage of Immovable property, it is unenforceable in law inasmuch as it was not attested in accordance with Section 59 of the Transfer of Property Act. The plaintiff, who took a conveyance of the interest of Mr. Smith on the 28th March 1208, contends that the document operated as an assignment or as a mortgage of moveable property and that, accordingly, it was not necessary to have the document attested in the manner required by Section 59 of the Transfer of Property Act.

In my opinion the document did not operate as a mortgage and certainly did not operate as a mortgage of Immovable property. A mortgage implies a debt and I am satisfied that the document extinguished the debt which was due by defendants Nos. 2-6 to Mr. Smith. The document expressly states that the transaction was entered into in order to pay off the sum of Rs. 35,000 due by the defendants NOS. 26 in favour of the plaintiff, A very important test to apply, whenever the question is raised whether a transaction amounts to a mortgage or not, is to see whether any interest is to run upon the sum of money that may be due by one party to another in consideration of which the transaction is entered into. If no interest is payable by the debtor to the creditor and if the document expressly states that the transaction is entered into for the purpose of paying off the sum due by the debtor to the creditor, it is difficult to understand how the transaction can be regarded as a mortgage. In the next place, it is important to take note of the condition which expressly provided that even if Mr. Smith failed to realise any commission owing to the exhaustion of coal or on any other ground the defendants Nos. 2-6 would not be liable for any sum of money that might be still due to Mr. Smith. In other words, the execution of this document put an end to the liability of defendants Nos. 2-6 to the plaintiff. No doubt, there are certain expressions used in the document to which the learned Subordinate Judge refers which, if read apart from the context, seem to suggest that the liability still continued, but the document must be read as a whole and, in my opinion, when it is read as a whole, it establishes that the liability of defendants Nos. 2-6 was at an end by the execution of the document.

In the next place, if it was a mortgage at all it was a mortgage of the commission which was due to the defendants Nos, 2-6 from the Company. Now, I cannot regard the interest which the defendants Nos, 2-6 had in the commission as an interest in Immovable property. It has been held in cases too numerous to mention that royalty is in reality the price paid for a portion of the soil the payment where of is distributed over a number of years. If that be so, then the interest in the royalty cannot constitute an interest in Immovable property. In my opinion the position is this defendants Nos. 2-6 had a claim to a beneficial interest in the commission which was not in their possession either actual or constructive. That beneficial interest could not be regarded as an interest in Immovable property. Defendants Nos, 2-6 transferred their claim to that beneficial interest to Mr. Smith and Mr. Smith in his turn transferred it to the plaintiff. In my opinion, the transaction is not one which required attestation in accordance with the provision of Section 59 of the Transfer of Property Act.

I would allow the appeal, set aside the judgment of the learned Subordinate Judge, and remand the case to the learned Subordinate Judge for decision according to law. The plaintiffs are entitled to the costs of the appeal. The costs incurred in the Court below will abide the result and will be disposed of by the learned Subordinate Judge.

Adami. J.

I agree.