V.M. Rao vs Parameswari Ammal and Others

The plaintiff is the sole executor of one A. V. M. Caesar as per the will dated 14-12-1977. A mortgage deed was executed in favour of Caesar by late Balasubramaniam and his wife, first

defendant herein, the latter acting on her behalf and also on behalf of the then minor children, defendants 2 to 4, and present minor, 5th defendant. The amount borrowed was Rs. 2,00,000/-

with interest at 12% per annum. The properties which had been mortgaged consist of four items. Item I belongs to the defendants, the first defendant having ,, life estate and the remaining entitled

to a bare ownership. Items 2, 3 and 4 are properties claimed by Balasubramaniam as his own. In respect of item 1, since minor''s interest was involved, an application was filed before the

principal Judge, City Civil Court, Madras by Balasubramaniam and his wife on their behalf and on behalf of their minor children on 7-71967 for mortgaging the property. Permission was granted

on 19-7-1967. The Mortgage was executed on 17-7-1967 and duly registered on 19-7-1967. As per the recital of the mortgage deed, Ex. 4, the amounts were paid at the time of the mortgage

by way of cheques except the amount of Rs. 65,000/- which was withheld by the mortgage. The money was borrowed by Balasubramaniam for purchase of some properties and to resell them

after dividing them into plots. Permission was granted by ,the Court on condition that the mortgagors deposit into court an amount of Rs. 5,000/-as and when a plot was sold.

The case of the plaintiff is as follows: -The mortgage, A.V.M. Caeser, pressed Balasubramaniam and the defendants for the payment of the above said loan, but no payment was made. The

mortgage brought the first plaint Schedule property for sale. Defendants 2 to 5 through their maternal-, uncle as next friend filed OS. 8137/77 on the file of the City Civil Court, Madras, for art

injunction to stop the sale raising false, frivolous and unsustainable contentions impleading their father Balasubramaniam as first defendant, their mother as second defendant and A.V.M. Caesar

as third defendant. The suit was ultimately dismissed on 11-4-1975. The property could not be sold on account of the pendency of the suit. Balasubramaniarn died in 1975. The defendants did

not make any payment towards the principal and interest under the mortgage except a meagre amount of Rs. 7,000/- during the lifetime of Balasubramaniam itself. The plaintiff issued a lawyer''s

notice dated 21-61979 to the defendants demanding repayment of the amounts due under the mortgage which notice was acknowledged by the first defendant on 21-6-1979. But there was no

comphance. The plaintiff, therefore, instituted the suit with the following prayers:

(a) that the Court will order the defendants to pay the plaintiff the said sum of Rs.4,80,800/- (Rupees Four lakhs eighty thousand eight hundred only) with further interest at 12% p.a. as may

accrue between t he filing of the plaint and the date of payment and also the costs of this suit on some date to b~,.- named by the Court, and in default the schedule I property may be sold and

the proceeds (after defraying there out the expenses of the sale) applied in and towards the payment of the amount of the said principal and interest and costs.

(b) that, if such proceeds shall not be sufficient for the payment in full of such amount, the defendants may be ordered to ''pay to the plaintiff the amount of the deficiency with interest thereon at

the rate of 6% per annum until realisation; and

(c) that for that purpose all , proper directions may be given and accounts taken by the Court.

It appears that though four items of properties were mortgaged the plaintiff chose to pray for the sale of the property under schedule I alone, since he felt that there would be difficult,, in selling

the other properties.

A written statement was filed on behalf of defendants 2 to 5 by the guardian appointed by the Court. The main contentions raised are as follows: - It was not true that Balasubramaniam

required money for his business which was beneficial for the entire family including the minors. The property under Schedule I was settled in favour of the minor children at the instance of the

grandfather in view of the father''s antecedents and propensity to embark on speculative ventures. Balasubramaniam and the first defendant sought the permission of the Court to have the

settlement rescinded in order to fulfill their wishes. But the Court declined to grant such a permission which fact forced them to file a petition seeking permission to create mortgage in order to

satisfy the requirement of third parties, in their endeavor for obtaining money. The Court granted permission only on condition that they execute an indemnity bond through which

Balasubramaniam and his wife undertake to pay the entire debt from and out of their own resources and income. So the Court was persuaded to accord sanction to deal with the property of

defendants 2 to 5 on the representation that the proposal of Balasubramaniam was likely to yield sizable profits and that the loan to the tune of Rs. 2 lakhs would facilitate the carrying out the

scheme of plotting out and selling the plaint schedule 2 properties. It was agreed between Balasubramaniam and the first defendant on the one side and A.V.M. Caesar the other that the loan

was to be repaid at the rate of Rs. 5,000/- f6r each ground sold. Notwithstanding the recitals in the deed of mortgage that large sums of money have been paid by A.V.M. Caesar by way

cheques, Balasubramaniam was not allowed to have those monies, in his hands, since they were taken back by the mortgage and his father Raghava Rao on -the assurance that Balasubramaniam

would be paid back those amounts upon his getting a deed of sale of the plaint schedule 2 property. Balasubramaniam reposed full faith, on them as the scheme of acquisition of lands in the Urur

village and plotting them out for sale was in his opinion a good venture and that all the monies could be easily recovered by him. Unfortunately, Raghava Rao, father of A.V.M. Caesar, died, on

27-&1973 and after his demise A.V.M. Caesar was only insisting in getting the sale deed of plaint schedule II property in his favour. The defendant 2 to 5 also submitted that the first defendant

knew nothing of the transaction that she signed papers on the, compulsion of her husband including the. execution of the mortgage deed which was admitted in registration. The essential condition

of the sanction accorded by the Court is that the minor''s property should not in any way be interfered with for satisfying the mortgage created in -favour of the mortgage. As regards the suit filed

by defendants, it was dismissed for default. There is no cause of action for the plaintiff since it was not shown that the sanction of the Court permitting the first defendant and, Balasubramaniam to

mortgage the minors interest in the property was, for a necessity and evidenced advancing to the interests, of the minors. The sanction is not in conformity with the requirements of Sections 27

and 31 of the Guardians and- Wards Act, VIII of. 1890.

The first defendant filed a, Written statement in which she adopted the written statement filed by defendants and she added as follows: - She was an illiterate person. Her husband taking

advantage of her ignorance of worldly affairs Obtain her signature on any paper, which he wanted her to sign. Her husbands business was a highly speculative one. Her husband did never take

care of the family property. She was not aware of the mortgage alleged to have been executed in favour of the plaintiff. She was not aware of the sanction said to have, been given by the, City

Civil Court, Madras; for the execution of the mortgage. Neither she not the other defendants ever got any benefit of the amounts alleged to have been advanced under the mortgage. On the basis

of these statements certain issues have been framed.

Thereafter defendants 2 to 4 having attained their majority filed a separate written statement, the essential averments of which are as follows Their father never borrowed any amount under the

mortgage deed dated 17-7-1967. One Ratna, a kept mistress of the deceased father joined their father in the execution of the mortgage-deed and also for making out application for sanction of

the Court in OP. 238/67 to create a charge impersonating the first defendant. The alleged payments under the mortgage deed are all ''fictitious. This fact was fully explained by their deceased

father in his reply notice dated 21-10-1973 for the notice dated 24-9-73 issued on behalf of Ceasar, the mortgage. They called upon the plaintiff to produce the same before the Court. The

exchange of notice between A.V.M. Caesar, and Balasubramaniarn would disclose the facts as they prevailed and the nature of transactions entered into, The total claim made for interest from

17-7-67 till the date of filing the plaint is barred by Art. 25 of the Limitation Act and is not sustainable. The defendants, after the death of their father, went to Kadambathur a village near

Tiruvellore, and were working as agriculturists and as such they are entitled to the benefits of Tamil Nadu Agriculturists Relief Act, 1938, as amended. Without proper analysis of the application

by Balasubramaniam and his wife, there was a grant of sanction by the Principal Judge, City, Civil Court, Madras, and the sanction was obtained by misrepresentation of facts and playing his

fraud on Court, that such was the case is supported by indemnity bond and other submission of accounts later . For the above said reasons property No 1 belonging to them is not subject to any

charge, Even otherwise , the other items of properties in schedules 2 and 4 are worth several lakhs of Rupees and therefore. Proper direction will have to be given by the court to bring to sale

the other properties in the first instance and realise the mortgage amount. Upon these pleadings the following issues were framed :

Whether, the payments of money mentioned in the mortgage deed dated 17-767 were effectively made?

Whether the mortgage encompasses properties sufficient to discharge the debt other than those defendants 2 to 4 and if so, whether the plaintiff should not proceed first against those

properties?

Whether defendants 2 to 4 are entitled to the benefit of the Tamil Nadu Agriculturists'' Relief Act, 1938?

Whether the claim of, the plaintiff in respect of interest is hit by limitation and if so for what period?

Whether the consent of the first defendant to the above said mortgage deed is vitiated and if so, whether the deed is not binding on her?

Whether the mortgage deed would be unenforceable in case the previous permission from the Court was obtained on false representation and if so, whether such false representation was

made?

Whether the minors are dispensed with paying the debt, if the money was not utilized for their benefit, and if so whether the money was not utilised for their benefit?

To what-relief, the parties are entitled?

In respect of his claim, the plaintiff examined two witnesses, viz., P.W. 1 being the Manager of the estate of Caesar and P.W. 2 being one of the attesting witnesses of the mortgage deed, Ex.

4, and marked 18 exhibits. The first defendant examined herself as D.W. 1; the second defendant examined himself as D.W. 2 and one Raghavan, who worked as a clerk of the grandfather of

defendants 2 to 5, was examined as D.W. 3. Four exhibits were marked on the side of the defendants. Records relating to O.P. No. 238/1967 in which permission to mortgage the minors''

property was obtained, which were summoned at the request of defendants 2 to 4, and some records relating to the present suit filed in the interdictory applications were marked as Court

exhibits C- I to C-7.

I shall now take up the issues seriatim Issue No. I As per the recital in the mortgage deed, Ex .P. 4, the amount of Rs. 1,35,000/- was paid at the time of the execution of the mortgage deed

as follows: Rs. 30,000/- by way of cheque dated 17-7-67 on the Bank of Baroda Ltd., Madras; Rs. 80,000/- by way of cheque dated 18-7-67 on the Bank of Baroda Ltd.,, Madras; and Rs.

15,000/- by way of cheque dated 10-7-67 on the Bank of Baroda Ltd., Madras; Rs. 10,000/- was agreed to be paid by the mortgage at the time of registration. Rs. 65,000/- was retained by

the mortgage for being deposited into court for the purpose of paying the consideration for the lands to be purchased, viz. the one described in schedule 2 of the mortgage deed. Then we have

certain - admissions made by Balasubramaniarn himself in the reply notice, Ex. D. 2, dated 21-10-1973, issued in reply to the notice, Ex .D. I given by the plaintiff on 24-9-73. In Ex. D. 2

Balasubramaniarn has averred as follows : -

Regarding the recitals of consideration in the mortgage apart from Rs. 65,000/mentioned in the document for the acquisition of Adayar - lands and Rs. 10,000/-and Rs. 15,000/- received by

Balasubramaniam. before the Registrar at the time of the execution of the mortgage deed, the payments of Rs. 80,000/- and Rs. 30,000/-drawn on the Bank of Baroda in favour of

Balasubramaniarn had been merely a make-believe affair. The cheques were drawn, and cashed by Balasubramaniam but in the instant encashment of these cheques your client''s father and your

client accompanied him and took back the said sums from Balasubramaniam assuring him that the moneys taken by them viz. Rs. 1,10,000/ will be surely passed on to him after he gets the sale

deeds of the Adayar property registered in his name and he obtains the lay out sanction for the division and disposal of the said plots as per order of Court permitting the mortgage of the

hypotheca

Therefore, as per Ex. D. 2, which is relied upon by the defendants, the payment of Rs. 65,000/- plus P.S. 10,000/- plus Rs. 15,000/making a total of Rs. 90,000/- is admitted whereas the

payment of Rs. 80,000/-plus Rs. 30,000/- making a total of Rs. 1,10,000/is disputed.

The case of the defendants is that to prove the payments the plaintiff has not produced the bank account nor the passbook. But~ Balasubramaniam in the statement extracted above says that

the amount has been actually encashed by him and then paid to Caesar and, therefore, the question of bank accounts and pass book will not in any way further the case of the defendants. The

sole question is whether the amount encashed by Balasubramaniam was handed over to Caesar. In this respect, there is no evidence -on the side ''of the defendants. The plaintiff has filed Exs. P.

2 to P. 11 in support of his stand. Exs P. 5, P. 6, P. 8 and P. 11 are not of much use for the purpose of determining whether the amount of Rs. 1,10,000/- was remitted back by

Balasubramaniarn to Caesar. I shall examine the other exhibits. Ex. P. 7 is the statement of account acknowledged by Balasubramaniam on 30-3-69. Ex. P. 7 reads as follows : -

Account copy of Sri M. Balasubramaniam with Sri A.V.M. Caesar relating to the mortgage loan of Rs. 2,00,000/-.

(See Table below)

Cr Dr

Rs Rs

1-1-1968 B. F. 1,351,000.00

4-1-1968 To cash remitted in Reserve

Bank of India. 54,1-52.00

1-3-1968 To cheque. 5,688.00

1-3-1968 To cheque. 5,160.00

31-12-1968 To interest upto date at 12% per annum 23,729.00

2,23,729.00

29 - 3 - 1969 2,000.00

If from the total of Rs. 2,23,729/- the interest amount is deducted, the principal amount will be Rs. 2,00,000/- Amounts of Rs. 54,152 + Rs. 5,688/- + Rs. 5,160/- make a total of Rs. 65,000/-

which is the amount admittedly received, as per Ex. D. 2. The first amount of Rs. 1,35,000/- corresponds to Rs. 1,10,000/plus Rs. 10,000/- and Rs. 15,000/- the two latter amounts admittedly

received as per Ex .D. 2. So the fact of Balasubramaniam acknowledging Ex. P. 7 shows that he did not. dispute the amount of Rs. .1,10,000/- also being shown as received by him in the

account of A.V.M. Caesar. Further Ex. P. 10 is the report filed by Balasubramaniarn before the Principal City Civil Judge, Madras, as per the order in OP. 238/67on22-9-79 in which

permission to mortgage the minors property was given. In that report Balasubramaniarn says that the mortgage had kept with himself Rs. 65,000/but does not whisper anything regarding the fact

of remaining amount having not been made, available to him. Ex. P. 11 is another report filed by Balasubramaniam before the same Court in the same Original Petition, viz., OP:238/67 on 24-

10-80 wherein he declares that the amount received by him was Rs. 2 lakhs. Therefore, it can be ''safely concluded that the amounts mentioned in the mortgage deed, Ex. P. 4, were effectively

paid by the plaintiff. This point is answered accordingly.

Issue No. 2.

As far as this issue is concerned, it was argued on behalf of the plaintiff that he has the right to proceed against any of the items of property mortgaged and this point is fairly conceded by the

learned counsel for the defendants. Therefore, this issue is answered against the defendants.

Issue No. 3.

This point which was raised by the defendants in their additional written statement did not find any support in the evidence adduced by them. It was, there fore, fairly conceded by the learned

counsel for defendants 2 to 4 that this issue is not in their favour. This issue is answered accordingly.

Issue No. 4.

This point was raised, in the additional written statement of defendants 2 to 4 and the learned counsel for defendants 2 to 4 fairly concedes that the suit claim is not hit by limitation. This issue is

also answered against the defendants.

Issue No. 5.

The case of the first defendant is that she was a puppet in the hands of her husband and was acting according to his biddings and that she might have affixed her signature on the documents and

petitions without knowing what it was about and therefore she is not deemed to have given her free consent to the mortgage. But there are certain facts, which do not support the stand taken by

the first defendant in her written statement. It is to be noted that the first defendant has also executed the indemnity bond, Ex. C. 1 on 187-67. Ex .C. 1 was signed before the Registrar of City

Civil Court, Madras and was attested by two persons about whom nothing was disclosed by the defendants. D.W. 3 even goes to the extent of admitting that those attesting witnesses are honest

persons. Ex. C. I was also signed by the then advocates M/s. Sundararajan and Sivaswami, appearing on behalf of Balasubramaniam and the first defendant. In Ex. C l. 1, there is clear recital in

respect of the loan and the purpose for which it was raised. Further, the affidavit of documents Ex. C. 5 filed by the first defendant in this suit shows that she had in her possession the petition

filed in OP. 238/67, the indemnity bond and the fair order in OP. 238/67. The plaint in OS. 8137/73, which was filed by the brother of the first defendant on behalf of minor children, viz., Ex .P.

14, proceeds on the basis that the bond is a true and valid one as could be seen in paragraph 18 of Ex. P. In Ex. D. 2, which is a reply notice sent by Balasubramaniam and the, first defendant it

is not stated that the first defendant was not aware of the mortgage or that she signed blindly on some paper. The entire reply notice, Ex. D. 2 revolves on the basis that the mortgage deed was

signed by the first defendant, but for some other reason it is stated that Balasubramaniam. and the first defendant were not bound to repay the amount. Further, the suit, OS. 8137/73 filed by the

brother of the first defendant on behalf of the minors on the file of the City Civil Court, Madras, was dismissed for default vide Ex .P. 16. The petition to restore the suit was also dismissed. In

the written statement filed by the first defendant in OS. 8J 37 of 83, viz., Ex. P. 15, in paragraph 4 she says definitely that she was aware of the mortgage and the purpose for which it was

executed.

Therefore, the above-mentioned documents exhibited by the plaintiff abundantly show that the first defendant, was fully aware of all the transactions and especially of the petition to obtain

permission to mortgage the property in which she had a life estat6 and of the execution of the mortgage deed in favour of the plaintiff. It is further noticed that in this case after taking the stand in

her written statement that she was a puppet in the hands of her husband, the first defendant has come forward with a new story at the time of tendering evidence in saying that Ratna, who was a

kept mistress of her husband, impersonated her in the application before the Court as well as in the - mortgage. Therefore, her own evidence destroys the stand taken by her in the written

statement and therefore the stand cannot be accepted. This issue is answered against the defendants.

Issue No. 6. ,

Learned counsel for the defendants were not in a position to point out any false representation made before the City Civil Court, Madras, in order to obtain permission to mortgage the property.

Therefore, this issue as framed does not arise. They instead said that the permission to mortgage the property was obtained on 19-7-67 that the mortgage deed was executed on 17-7-67 that is

to say prior to the permission and that such a mortgage executed at a time when there was no proper permission of the Court has no legal value whatsoever. This fresh issue being one raising

only a question of law can be agitated by the parties at the stage of arguments. Learned counsel for the plaintiff did not raise any objection a come forward with his contentions in this r1pect. He

would contend that though the mortgage deed was executed on 17-7-67, it was registered only on 19.;7-67 late in the evening, as it could be seen from the endorsement of the Sub-Registrar on

the document, and that therefore the mortgage became complete only after the, permission was obtained by the Court. As, against this, it is argued on behalf of the defendants that as per law of

Registration, a document takes its effect not from the date of registration but from the date of execution and that therefore the mortgage deed even though registered on 19-7-87, has to be

constructed to have come into existence on 17-7-1967, that is to say, prior to the Courts'' permission. In answer to this, the learned counsel for the plaintiff would place reliance on two

judgments of this Court. The first one is N.R.M.M.M. Muthiah Chettiar Vs. The Official Receiver of Tinnevelly District and Another, and the second one is M.G. Sundaragiriraja Ayyangar and

Others Vs. D. Balasubramania Ayyar and Another, , wherein it was held that for the purpose of declaring a person insolvent or not the relevant date would Not ,be the date of execution of the

document but the date of registration.

In order to decide what is the relevant date as far as the mortgage deed of minors'' property to be executed after obtaining the permission of the Court is concerned it is necessary first to

bear in mind the dual purpose of registration, as per the registration Act 16 of 1908. The first is to provide the parties to the transaction with a document in respect of which there may not be

dispute as between them regarding the contents of the document and the date thereof. The second purpose is to bring the document to the notice of all third parties which may be concerned by

the transaction at the time of registration as well as any period thereafter. In fact any interested party, is permitted to get the entries in respect of the properties in the registers of the Registrar''s

office, in order to find out, for instance, whether there is any encumbrance or any previous sale. With this in mind, we have- to turn back to Section 47 of the Registration Act, which reads as

follows :-

Time from which registered document operates :

A registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration.

Registration being only a device to afford to the parties as well as third parties certain advantages is not creative of any transaction. The transaction is created by the consent of parties and when

such a consent has been reduced to writing whenever such a requirement is necessary. That is why Section 47 provides that the transaction will operate from the time it has come into existence

and not from the time of the registration. Therefore, between the parties to the transaction there may not be any doubt that the date of commencement of operation of the transaction is the date

of its coming into being. The position would be different as far as the third parties are concerned. Third parties susceptible of being affected by a transaction would be aware thereof only from -

the time of registration which will be the relevant date for them.

Now, let us consider the case of the creditor of any person who has alienated his property. The matter is dealt with by Section 54 of the Provincial Insolvency Act, 1920. That provision

reads as follows : -

Avoidance of preference in certain cases :-

(1) Every transfer of property, every payment made, every obligation incurred, and every judicial proceeding taken or suffered by any person unable to pay, his debts as they become due from

his own money in favour of any creditor, with a view of giving that creditor a preference over the other creditors, shall, if such person is adjudged insolvent on a petition presented within three

months after the date thereof, be deemed fraudulent and void as against the receiver, and shall be annulled by the Court.

(2) This section shall not affect the rights of any person, who in good faith and for valuable consideration has acquired a title through or under a creditor of the insolvent.

It is in a case under this Act that this Court observed in the judgment, first quoted, viz., Muthiah Chettiar v. Official Receiver of Tinnevelly District. (1933) 64 M U 382 :

N.R.M.M.M. Muthiah Chettiar Vs. The Official Receiver of Tinnevelly District and Another, , as follows : -

In a case like the present, up to the date of registration there can be no valid transfer or mortgage of land within the meaning of S. 59 of the Transfer of Property Act. If the time was to run from

the date of execution of the document the objection of S. 54 could easily be . frustrated. A mortgage or sale of immovable property my be registered up to four months after its execution. As

pointed out by the learned Judge, a dishonest insolvent has only therefore to date such fraudulent transfers with a date more than three months prior to the filing of the petition and then they

cannot be avoided under S. 54.

Similar was the view taken in the subsequent decision referred to above. Therefore, in the above said two decisions this Court has not applied Section 47 of the Registration Act, because that

section is to be applied only as regards rights and obligations between the parties to the contract who are bound by the agreement from the time the agreement has come into being and not to

third parties like a creditor who is aware of the transaction only from the time it is made public by way of registration.

The position of law being thus made clear let us now turn to the facts of the case. The petition in OP. 238/67 was filed on 7.767 by the father and mother for permission to mortgage the

property belonging to the minors u/s 8 of the Hindu Minority and Guardianship Act, 1956. u/s 8 of the Act, the natural guardian shall not mortgage a property without the previous permission of

the Court. The law is therefore, very clear that any dealing by way of mortgage of property by the guardian should be preceded by the permission of the Court. When permission is given after

the execution of the mortgage it cannot be said that the mortgage is one which has been executed with the permission of the Court and therefore dispensing the plaintiff from the due enquiry that

he has to make. The mortgage is between the guardian, first defendant and Balasubramaniarn on the one side and AN.M. Caesar on the other. The parties to the transaction of mortgage are the

parties in this suit or their successors-in-right. As between them Section 47 of the Registration Act would ,apply with full force and without any exception.- The judgments relied on by the

plaintiff which deals exception to Section 47 could be taken advantage of only by third parties to the transaction. The relevant date of the mortgage is not 19-7-67, but 17-7-67, which is the

date of the execution of the mortgage.

Learned counsel for the plaintiff at this stage brought to my notice the decision of the Supreme Court in Ram Saran Lall and Others Vs. Mst. Domini Kuer and Others, . Placing reliance on

that decision, he contended that as long as the mortgage was not completed by way of registration there is no-mortgage and that, therefore, permission can be obtained at any ,time prior to such

completion. In the case relied upon by the plaintiff the parties were governed by the Mohammedan Law of preemption by custom and there was no dispute regarding such a right of pre-emption.

The only question which arose was whether the first demand called talab-I-mowasibat, which has to be made after the completion of the sale in order that the right may be enforced, was made

before or after such completion. In clear connection it was to be determined when the sale was completed. The Supreme Court held that Section 47 of the Registration Act would come into play

only after the document has been registered, that the said section has nothing to do with the completion of the registration and therefore nothing to do with the completion of a sale and that a sale

which is admittedly not completed until the registration of the instrument of sale is completed cannot be said to have been completed earlier because by virtue of S. 47 the instrument by which it

is effected, after it has been registered, commences to operate from an earlier, date. The question in that case being clearly not the date of execution of the document but the date of completion

of the document, it is obvious that the only date which could be taken into account in that case is the date of completion. Further, the person who is exercising the right of preemption is a third

party in the transaction.-

As we have observed earlier, Section 47 of the Registration Act would not apply to third parties and therefore this decision only gives a confirmation to the view. taken by me in this case

regarding the operation of Section 47. The ingenious argument of the learned counsel for the plaintiff is that as long as, there is no registration there is no mortgage and therefore the permission

can be obtained at any time prior to such a registration. This will be quite contrary to the scheme of the Hindu Minority and Guardianship Act, 1956 which clearly -stipulates that the natural

guardian shall not without the previous permission of the Court mortgage the property. Therefore, in this case it is not the completion of the mortgage which we have to take into account, but the

starting of the mortgage operation itself. If a person executes a mortgage of the property prior to obtaining permission, leaving only the registration not effected, that would mean that he pre-

supposes that the permission is already granted or would be automatically granted and reduces the essential statutory safeguard of prior permission to a same formality. That would show that the

guardian in his mind does not attach any importance to the permission of the Court. The previous permission of the Court provided u/s 8 of the Hindu Minority and Guardianship Act, 1956

cannot be allowed to be considered by the guardian in such a light manner. The previous permission should exist before the starting of the operation of the mortgage. At any rate, as far as the

Hindu Minority and Guardianship Act, 1956 is concerned, it is not completion of the transaction that is, contemplated but the operation itself and that operation, by virtue of Section 47 of the

Registration Act, is deemed to have started from the date of execution. Therefore, this case is clearly distinguishable from the case relied on by the learned counsel for the plaintiff. It is thus clear

that the mortgage was executed prior to the obtaining of permission of the Court and is not covered by such permission. This issue is answered accordingly.

Issue No. 7.

Learned counsel for the defendants stated that the way in which the. money is utilised after the mortgage of property is not relevant but what is relevant is whether, at the time of the execution of

mortgage, the said execution is in the interest and for the benefit of the minors. This was the great question which arose in this case, according to the learned counsel for the defendants. Learned

counsel for the plaintiff was ready to meet that point and in fact met it with much vigour. He brought to my notice a Full Bench decision of this Court which has laid down the guidelines in this

field. Learned counsel for the defendants also concurred in saying that the same decision has to be followed. That Decision is one reported in Harikrishnan Vs. Sri Chanda Prabhuji Jain Temple

and Others, . The essential guidelines of that decision are contained in the following passage at page 251 : -

So long as he has no knowledge of the guardian''s misrepresentation or fraud, he will be entitled to rely on the order of the Court as affording evidence of his honest enquiry. If the minor proves

that the alienee knew more or did not himself rely on it but made independent enquiries, the onus being on the minor to prove it, the order of Court will not afford conclusive evidence on the

question of enquiry; burden will then shift to the alienee to prove due enquiry. Even if he fails in that, he can sustain the alienation on the ground that it was for the necessity or benefit of, the

minor.

The first thing to be therefore examined is whether the order of the Court is sufficient in this case to protect the alienee, in other words, whether the alienee knew more or did not himself rely on

the order. In this connection, we are mostly left with the mortgage deed, Ex .P. 4, itself, which is an elaborate one. Though the mortgage is not signatory of the document, the document is

addressed to him and it cannot be said that he did not have any knowledge thereof at the time of its execution. Further, there is a recital in the document that , he has issued some cheques on 17-

7-67 itself. There is also a recital to the effect that on 17-7-67 the mortgagors have delivered and deposited with the mortgage the title deeds. Therefore, the mortgage is deemed to have fully

known the deed of mortgage which was executed in his favour. That deed of mortgage recites that in OP. 238/67 in the City Civil Court, Madras, the Principal City Civil Judge has on 15-7-67,

permitted the mortgagors to raise funds by mortgaging the said property. In fact, on 15-7-67, there was no such order. Therefore, if the mortgage consented to the mortgage containing such a

recital contrary to facts, he should necessarily be one, who did not very much rely on any permission of the Court. Secondly, the reasons for borrowal is to be found in page 7 of Ex. P. 4 and the

relevant paragraph reads as follows : -

AND WHEREAS the 1st mortgagor has to pay into the Court about Rs. 55,000/- being the balance of amount due and payable for completing the sale of 23 grounds of building sites detailed

in the schedule No. 2 hereto, to meet the expenses connected with the laying of the roads in the said lands and also to meet urgent family debts and family necessities, and also to further invest

and improve his lay-out business, decided to raise a loan of Rs. 2,00,000/- (Rupees two lakhs only) on the security of the properties set out in the schedules Nos. 1, 2,3 and 4 hereto

approached the mortgage and offered him FIRST CHARGE on the properties under schedules Nos. 1, 2, 3 and 10 Grounds 1800 Sq. feet of land in Schedule-4 hereto, and also giving third

charge on the 24 grounds 267 sq. feet of land in schedule No. 4 hereto;

There is not whisper in this paragraph that the money was to benefit in any manner the minors whose properties were included in schedule No. 1. Therefore, the mortgage is really one who in this

case does not get protected by the order of the Court. The mortgage has to show that the mortgage was for the benefit of the children.

Further, in the order% of the Court, Ex. P. 3, there is a clause to the effect that the petitioners, that is to say, Balasubramaniam and the first defendant, have to pay periodical interest

regularly and also pay a minimum of Rs. 5,000/- for every ground sold out, out of the 35 grounds of the mortgaged property of the petitioners in order to discharge the principal amount within

three years as per the terms of the indemnity bond and that the petitioners shall file a report once in six months till the entire, debt is discharged and the first report is to be filed by 22-12-1967.

The mortgage was, therefore, also put on notice about the existence of the indemnity bond executed by the mortgagors to the Court and that the indemnity bond was to the effect that

Balasubramaniarn and the first defendant had to undertake to pay the entire debt from and out of their own resources from their properties without in any manner affecting the interest of the

minors. Therefore, though the property of the minors was allowed to be mortgaged by the Court since the mortgage wanted that property also to be mortgaged, by way of abundant caution, it

has been made clear that the minors property should in no manner get affected, which fact should have indicated to-the mortgage that the mortgage was not really in the interest of the minors

because if the mortgage was really in the interest of the minors, there is no recompulsion to pay back the loan with the exclusive money of the guardians. Further, the mortgage deed gives full

details about the previous debts of Balasubramaniam, the business which fie was in contemplation of and the difficulties which he was meeting in that business. Therefore, the mortgage here knew

much about the transactions and the purpose for which the mortgagors mortgaged the property. It was not a simple mortgage by persons in need of money for bringing up and educating the

children. Regarding the aspect of benefit for the children, no proof was adduced or attempted to be adduced by the plaintiff. On the contrary, there are clear indications of the purpose for which

the permission was obtained and the mortgage executed by Balasubramaniarn and the first defendant in the petition filed before the Principal Judge, City Civil Court, Madras (OP. 238/67). In

that petition, Ex.C-7, it is stated that in or about March 1963 Balasubramaniarn having to proceed to Russia, with a view to provide for any contingency, settled the property (Schedule I

mentioned property) which is their family home on his wife for her life and thereafter on the minors and such other children as may be surviving on the date of the death of the wife. It is further

added in paragraph 4 in Ex. C. 7 as follows : -

The first petitioner returned to India after a successful foreign tour. The purpose for which the settlement was made was to provide for the chance of any mishap to the 1st petitioner while

abroad. and there is no need for it now and the parties are agreed that the settlement deed dated the 31st January 1963 may be revoked and the title vested back in the first petitioner to enable

him to deal with the property and raise such monies as he may acquire for his business on the security of the same.

It is thus clear that Balasubramaniarn and his wife did not consider-the settlement as a real one and wanted to mortgage the property as if it was still the property of Balasubramaniarn for the

purpose of his business and not for the benefit of the minors. The permission was in their eyes a mere formality to be gone into without any regard to the interest of the minors.

In paragraph 6 of Ex. C. 7 it is, however, added as follows:

If the land is developed, the petitioner is expecting huge profits and the minor will also stand to benefit.

Therefore, the only benefit which was contemplated was the eventual profit which may accrue in the business in which Balasubramaniam engaged himself. This is not what is contemplated in law.

The duties of the guardian of property are dealt with u/s 27 of the Guardians and Wards Act, 1890, which is supplemental to the Hindu Minority and Guardianship Act, 19% as per Section 2 of

the latter Act, 1956. That Section 27 of the Guardians and Wards Act, 1890 provides as follows

Duties of guardian of property : A guardian of the property of a ward is bound to deal therewith as carefully as a man of ordinary prudence would deal with it if it were his own, and, subject to

the provisions of this chapter he may do all acts which are reasonable and proper for the realisation, protection or benefit of the property.

Section 8 of the Hindu Minority and Guardianship Act, 1956, provides that the natural guardian has power to-do all acts, which are necessary or reasonable and proper for the benefit of the

minor. It cannot be said that the act of mortgaging the property of minors in the business of the guardian in the hope that the eventual profit of the business will accrue to the minors is an act,

which could be considered as necessary or reasonable and proper for the benefit of the minor within the meaning of Section 8 of the Hindu Minority and Guardianship Act, 1956, read with

Section 27 of the Guardians and War& Act, 1890.

20A. Learned counsel for the plaintiff contended that the failure Of Balasubramaniam in his business cannot be attributed to any risk in the business but to his own incompetence and certain

unforeseen circumstances and for that purpose relied on the evidence of D.W. 2 him self at pages 9 to 11 of his cross examination on 5-8-86. He further contended that the reasons for not

obtaining the sale deeds and the reasons for .the non fructification of the business of Balasubramaniam, as disclosed in Exs. D. 2 and P. 14 would show that Balasubramaniam himself is to be

blamed for the same and that the same conclusion has to be arrived at also from the reading of the depositions of D.W. 2 in pages 8 and 9 of his cross-examination dated 5-8-1986. These

arguments are based on the assumption that the purpose of the loan was to augment the properties of the family and thereby confer benefits on the minors. No doubt if it is accepted that a.

natural guardian can mortgage the property of the minors for his business in the -contemplation that the overall profit will ultimately benefit also the minors, then one can accept that if the business

did not fructify the mortgage cannot be made to suffer, whatever may be the reasons for the failure of the business. As pointed out earlier, such a venture cannot be considered as one which is

protected under Sec. 8 of the Hindu Minority and Guardianship Act. It is, therefore, clear that the mortgage was not prompted by any necessity or direct interest of the minors. ''This issue is

answered accordingly.

To sum up issues7and8areanswered in favour of the defendants 2.to 5 and the remaining issues are answered in favour of the plaintiff.

In the result, the plaintiff is entitled to a decree in the following term :-

The first defendant is directed to pay to the plaintiff a sum of Rs. 4,80,800, with further interest at 12 per cent per annum as may accrue between the filing of the plaint and the date of payment

and also costs of the suit within three months -from this date and in default the interest of the first defendant in Schedule I mentioned property may be sold and the proceeds (after defraying

thereof the expenses of the sale) applied in and towards the payment of the amount of the said principal and interest and costs.

The suit stands dismissed without costs-as far as defendants 2 to 5 are concerned.

Ordered accordingly.