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TMI Blog1968 (6) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged that on 30th August, 1944, a registered memorandum of agreement was entered into between the plaintiff and Ranjit Bose at Calcutta evidencing the deposit of title deeds. As further security for the said advance Ranjit Bose charged and hypothecated by way of first charge in favour of the plaintiff, the plants, machinery, furniture and other movable assets appertaining to the said Rangaroon Tea Estate. On 30th August, 1944, Ranjit Bose, it is alleged, executed in favour of the plaintiff a deed of hypothecation on tea crops of Rangaroon Tea Estate to secure a cash credit account not exceeding Rs. 20,000. In paragraph 6 of the plaint it is alleged that on 20th December, 1944, by a deed of transfer executed by Ranjit Bose, in favour of Rangaroon Tea Estate to which the plaintiff was a party, Ranjit Bose relinquished all right, title and interest in Rangaroon Tea Estate in favour of Rangaroon Tea Company Ltd. and transferred and assigned the Rangaroon Tea Estate, the movable properties and tea crops to Rangaroon Tea Company Ltd. subject to the aforesaid mortgage by deposit of title deeds, hypothecation of movables and tea crops in favour of the plaintiff. The plaintiff alleged th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 109 of the Companies Act. The learned judge was pleased to dismiss the suit with costs. I shall first deal with the question as to whether the mortgage transaction was of Ranjit Bose or of Rangaroon Tea Company Ltd. ****** Counsel for the appellant placed emphasis on the document dated 30th December, 1944, being exhibit E. The contentions on behalf of the appellant were that exhibit E would indicate that the transaction was of Ranjit Bose's because the property had been purchased by Ranjit Bose. There are some recitals in exhibit E which was made between Ranjit Bose of the first part, Rangaroon Tea Company Ltd. of the second part and Calcutta National Bank Ltd. of the third part. Calcutta National Bank Ltd., the appellant, did not sign exhibit E. It was signed by Ranjit Bose and Rangaroon Tea Company Ltd. It was also registered in book No. 1. In exhibit E, Ranjit Bose is described as transferor and Rangaroon Tea Company Ltd. is described as transferee. One of the recitals is that the transferee-company being short of funds negotiated with Calcutta National Bank Ltd. for advance of Rs. 2,75,000. The second recital is that by a resolution dated 3rd August, 1944, the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of March and April, 1944, and that evidence was adduced for the purpose of introducing possession. In my opinion, counsel for the respondent rightly contended that it was unbelievable that Treanor would part with possession in the month of February, 1944, before he was paid the purchase price. The document, namely, exhibit B, dated 30th August, 1944, being the conveyance, indicates by intrinsic evidence that the vendor, Treanor, was seized and possessed of the tea estate. The consideration was for the purchase of land and movables. I am unable to accept the contention that Ranjit Bose was put in possession in the month of February, 1944. Counsel on behalf of the appellant contended that if the transaction was not of Ranjit Bose's but of Rangaroon Tea Company Ltd. the transaction would not be within the mischief of rule 94A of the Defence of India Act for two broad reasons. Firstly, that the mortgage would not be within the mischief of rule 94A and, secondly, there was no instrument creating charge within the meaning of rule 94A. The relevant provisions of rule 94A for appreciating the rival contentions in the present appeal are as follows: "(1) For the purpose of this rule ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of hand, I hereby deposit to the plaintiff as a collateral security by way of equitable mortgage, title-deeds of my property." It was held that the mortgage was complete without the memorandum and the memorandum was not in writing which the parties had made as the evidence of their contract but only a writing which was evidence to the fact from which the contract was to be inferred. This question again came up for decision before the Judicial Committee on three occasions. These are the decisions in Subramanian v. Lutchman [1923] L.R. 50 I.A. 77; AIR 1923, Sundarachariar v. Narayan Ayyar [1931] LR 58 IA 68; AIR 1931 PC 36 and the case of Sir Hari Shankar Paul v. Kedar Nath Saha. [1939] LR 66 I.A. 184; AIR 1939 PC 167. The test laid down in Kedamath Dutt v. Shamlall Khettry [1873] 11 Beng. LR 405 was referred to in those cases. Lord Carson in Subramanian v . Lutchman [1923] LR 50 IA 77; AIR 1923 PC 50 said that: "If the memorandum in question was a bargain between the parties, and that without its production in evidence the plaintiff could establish no claim, it would require registration." Lord Tomlin in Sundarachariar' s case [1931] LR 58 I.A. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions ............" The Supreme Court referred to the decision in Hari Shanker Paul v. Kedar Nath Saha [1939] LR 66 IA 184; AIR 1939 PC 167 , where the essential terms of the transaction stated as "hereby agreed" and reference to the moneys as "hereby secured" were held by Lord Macmillan to amount to the parties professing to create a mortgage by deposit of title deeds contemporaneously entering into a contractual agreement in writing making the same an integral part of the transaction and itself an operative instrument and not merely evidential. In the present case exhibit A dated 30th August, 1944, would show in the recitals that the mortgagor has deposited with the mortgagee the title deeds and thereafter these words occur "now it is hereby agreed and declared by and between the mortgagor and the mortgagee". There are three important clauses. The first clause relates to the amount and obligation to repay with interest and the dates of repayment. The second clause states that so long as the principal sum remains due and outstanding the mortgagor shall pay to the mortgagee interest at the rate of 6 per cent. per annum on the 15th day of each month. The third clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce a transfer of an interest in specific immovable property. Relying on that definition counsel for the appellant contended that, since the Defence of India Act referred to a charge, a mortgage would not be within the mischief of the provisions. Reliance was placed on Crates on Statute Law, 6th edition, at pages 168 to 174, in support of the proposition that ordinary meaning should be given to the word "mortgage". It was also said that the legislature should be presumed to know of the distinction between "mortgage" and "charge" and, therefore, since the word used was "charge", a mortgage should not fall within the scope and intent of rule 94A. In support of that contention reference was made to certain other provisions of the Defence of India Rules, namely, rules 90 and 94, in support of two propositions that rule 94 spoke of mortgages and rule 90 referred to several expressions and those expressions were said to mean matters stated in those Rules. It was, therefore, contended that when rule 94A said that securities should mean the instruments mentioned there, the meaning was exhaustive and no higher content should be given to the word "charge". Reliance was placed on the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the instrument requires you to conclude that they are intended to be used in a sense limited to things ejusdem generis with those which have been specifically mentioned before." Rigby L.J. said : "The main principle upon which you must proceed is, to give to all the words their common meaning : you are not justified in taking away from them their common meaning, unless you can find something reasonably plain upon the face of the document itself to shew that they are not used with that meaning, and the mere fact that general words follow specific words is certainly not enough." In S . S. Magnhild v. Mcintyre Brothers and Co. [1920] 3 KB. 321 , the question for con sideration was the meaning of the words "or other accident". McCardie J. said, relying on the observation of Vaughan Williams L.J. in Tillmanns v. S . S. Knutsford [1908] 2 KB 385, 403, 409, that if a common genus was not to be found, the necessary consequence would be that the words "or any other cause" could not be limited by the doctrine of ejusdem generis. In Tillmanns' case ( supra ), Far well L.J. said that: "Unless you can find a category there is no room for the application of the ejusd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an employer and the contract would constitute the person a workman, male or female. Clerical work was added later. Therefore, the words "or otherwise" were held by Lord Wright to be intended to embrace the entire range of wage earning or salaried employment. In the present case counsel for the respondent, in my view, rightly contended that there was no common feature in the four categories enumerated in sub-rule (1) of rule 94A. Counsel for the respondent rightly submitted that ordinary meaning should be given to the words "instruments creating charge" and hypothecation or mortgage instruments creating charge or lien on the assets of the company would be within the scope of rule 94A(1). For these reasons I am unable to accept the contention of counsel for the appellant that the words "instruments creating charge" would not embrace hypothecation or mortgage instruments. With respect, I am unable to agree with the view expressed in the Travancore-Cochin decision AIR 1957 TC 6.. The contention on behalf of the appellant that mortgage was something different from charge and since the word used in rule 94A(1) was only charge, the mortgage would be exempted from the operation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsely a charge might not amount to a mortgage in all cases. Where the charge is created over specific immovable property, though it might not be a simple mortgage, it was held to be a mortgage, though of an anomalous kind mentioned in section 98 of the 1882 Act. In the Madras case reference was made to the Bench decision of this court in Royzuddin Sheik v. Kali Nath Mookerjee [1906] ILR 33 Cal. 985 and it was said that the Calcutta view of the effect of the document creating a charge on specific immovable property was too narrow and even where there was no covenant to pay the document creating such a charge was a mortgage and not a mere charge liable to be defeated by a subsequent mortgage deed or sale deed. The decision in Chhaganlal Sakharam v. Chunilal Jagmal AIR 1934 Bom. 189 was also relied on by counsel for the respondent on the observation appearing at page 190 of the report that every mortgage includes a charge and it would be a difficult question to find out if a charge amounted to a mortgage. No court will favour an endeavour to give to an identical transaction another name with the object of bringing about the particular legal results in question without obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of consideration for any of the securities mentioned in rule 94A is prohibited by the statute. It should be stated here that the Travancore-Cochin case AIR 1957 Trav., Coch. 6 does not refer to sub-rule (7). It may be that the particular sub-rule was not placed for consideration in that case or it may be that it was not necessary to go into the question by reason of the conclusion that the hypothecation in that case was not within the mischief of rule 94A. Cheshire on the Law of Contracts, 6th edition, page 312, states that the effect of the two maxims ex turpi causa non oritur actio and in pari delicto potior est conditio defendants is that neither can maintain an action against the other if he requires any aid from the illegal transaction to establish his case : see Fanners' Mart Ltd. v. Milne [1915] AC 106 . If a plaintiff cannot maintain his cause of action without showing as part of such cause of action that he has been guilty of illegality then the courts will not assist him in his cause of action. This was the opinion of A. L. Smith L. J. in Scott v. Brown Doering Mcnab Co. [1892] 2 QB 721. Counsel on behalf of Ranjit Bose's heirs contended that the plai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is to be specific pleading and there is to be evidence that the exemption is available by reason of the transaction having been entered into in the ordinary course of normal business and, secondly, that it is strictly and solely for the purpose of that business. There is no evidence to establish such a case of exemption. The last question was whether the transaction of mortgage satisfied the requirements of registration under section 109 of the Companies Act. If the transaction was of the company and if there was no registration under section 109 the result would be that any person who fails to register it would rank as unsecured creditor. This would be so in case of valid transactions. In the present case irrespective of the illegality under rule 94A of the Defence of India Rules the plaintiff-appellant did not have the mortgage registered in accordance with section 109 of the Indian Companies Act. For these reasons, I am of opinion, that the contentions advanced on behalf of the appellant fail. The judgment is affirmed. The appeal is dismissed. The order as to costs made by the learned judge in the trial court is set aside. This being a transaction which is illegal nei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , by which its material provisions have been reenacted with slight modifications. The learned trial judge has found, and so have we, that on or about August 30, 1944, the respondent-company by its trustee or benamidar, one Ranjit Bose, deposited title deeds of Rangaroon Tea Estate with the appellant-bank with intent to create a security on the said estate. It transpires that Ranjit Bose, the trustee or benamidar, was the ostensible owner and the respondent-company, the real owner of the property, On August 30, 1944, an agreement was entered into between the appellant-bank and Ranjit Bose which was recorded in a memorandum of agreement subsequently registered with the Registrar of Assurances. It is recited in the memorandum that the mortgagor has already deposited with the appellant-bank title deeds of properties which are free from encumbrances, with intent to create a security on the same, by way of mortgage by deposit of title deeds in favour of the appellant-bank for due repayment of the sum of Rs. 2,75,000 which the mortgagee has lent and advanced to the mortgagor. The terms and conditions on which the loan has been advanced and on the basis of which the mortgage has been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined again in rule 94A specifically for the purpose of that rule. It is true that the rule does not speak of mortgage, but only of charge. It cannot be disputed that every mortgage creates a charge and, in its generic sense, a mortgage must, and does, include a charge. A statute must be given the meaning that its language permits so as to carry out and not to defeat its object. The object of the rule, as is provided by section 2( xxii ) of the Defence of India Act, 1939, is to control the possession, use or disposal of, or dealing in securities. It will be unreasonable to construe the expression "charge" in a restricted sense, as confined to a transaction not amounting to mortgage as contemplated under section 100 of the Transfer of Property Act, and not in its wider and generic sense. To do so will be to hold that under rule 94A, although a company cannot lawfully create a charge by an instrument on its assets except with the consent of the Central Government, it can create a mortgage by an instrument in the absence of such consent. In my opinion, such a construction is not tenable. Having regard to the object of the rule and the principle that every mortgage necessarily creates a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comply with such conditions. (5) In this Regulation, references to securities and to the issue of securities respectively include references to any mortgage or charge, whether legal or equitable, and to the creation of, or the increasing of the amount secured by any such mortgage or charge; and the expression 'security' includes shares, stocks, bonds, notes, debentures, debenture stock, treasury bills, a bill of exchange other than a bill payable on demand or at a fixed period not exceeding six months after date or after sight, a promissory note of a local authority, a promissory note payable more than six months after date, a deposit receipt for money lent, issued by a local authority or by any person carrying on a business other than the business of banking, and a unit or sub-unit of a unit trust, but does not include any other security Butter-worth's Emergency Legislation The Defence {Finance) Regulations, 1939." In the Defence Regulations, mortgages created by instruments are specifically included in the definition of securities. In this connection, it may be pointed out that the legal position in India has been made clear by the Capital Issues (Control) Act, 1947, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trav. Coch. 6 that the expression "issue" is singularly inapt in relation to mortgage. A mortgage is created or executed, not issued. A company issues shares or debentures. The term "issue" is a mercantile term and has a specific meaning in trade and commerce which it has acquired by long usage. One does not speak of issuing mortgage. Therefore, it is contended, mortgages are not contemplated under rule 94A which relates to control of capital issues. It is true that in popular parlance or in commercial language one does not speak of issuing a mortgage ; but then, one does not speak of issuing a charge either ; and yet the rule contemplates issue of instruments creating a charge or lien. After all the Defence of India Rules cannot be described as a piece of commercial legislation although commerce and trade come within its scope. The expression "issue" has a special meaning given to it by the character and scope of the Rules themselves. That the term is not used in a popular or mercantile sense is clear from the fact that the rule provides that a person shall be deemed to make an issue of capital who issues any securities for cash or otherwise. When a company borrows money on a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue thereof have not been complied with, but nothing in this paragraph shall be construed as modifying the liability of any person to any penalty in respect of any failure to obtain such consent or to comply with such conditions." No similar provision is to be found in rule 94A. In the context of the statute it must be held that not only the mortgage is invalid but the consideration given for the mortgage is also irrecoverable because the entire transaction is tainted with illegality. Having regard to the finding that the mortgage is invalid and that the consideration given for the mortgage is not recoverable in law, it is not necessary to go into other questions. However, as an issue was raised before the learned trial judge with regard to the effect of non-registration of the mortgage under section 109 of the Companies Act, I propose to deal very briefly with that aspect of the matter. As the mortgage was created by the company in respect of its properties, the mortgage is registrable under section 109 of the Companies Act. It appears that the mortgage has been registered under section 109A within the time extended by an order of S.B. Sinha J. That order was presumably ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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