Civil Appeal No 140 of 1951
Appeal from a Judgment and Decree dated 22nd Septem ber 1947 of the High Court of Judicature at Bombay Sen and Bavdekar JJ in Appeal No 41 of 1943 arising out of decree dated 4th September 1942 of the Court of the First Class Subordinate Judge at Poona in Civil Suit No 808 of 1941
Roshan Lal and BS Shastri for the appellant
Hardyal Hardy for the respondent
February 22
The Judgment of the Court was deliv ered by BOSE J
This is a defendant s appeal in a suit on two mortgages
The first was executed on the 7th of April 1931 by the defendant and his father
The second was dated the 17th of December 1935 and was executed by the defend ant alone
The first was for a sum of Rs 9500 the second for Rs 3500
The same property was mortgaged each time
The claim on the two deeds together was for Rs 20774 3 0
These mortgages were in favour of one Narayan Gopal Sathe
On the 28th of March 1940 the mortgagee assigned them both to the plaintiff who now sues on them
The defence was that both mortgages were satisfied
The main evidence on which the defendant relied to prove satisfaction was an agreement dated the 17th of October 1937 executed by the mortgagee Narayan Gopal Sathe in favour of the defendant
The document has been excluded from evidence by the trial Court as well as by the High Court on appeal on the ground that it required registration
If this document is excluded then there is a concurrent finding of fact by both the Courts that the rest of the evidence is not good enough to prove satisfaction
They have disbelieved it and decreed the plaintiff s claim in full
The only ques tions before us are 1 whether this document required registration and 2 whether if it did it 493 cannot still be used for what the defendant claims is a collateral purpose namely proving full payment of the mortgage amount
The agreement came about in this fashion
The mortga gee Narayan Sathe was appointed Receiver of two Cinemas in Poona
The Court appointing him required him to produce a surety in the sum of Rs 10000
The defendant agreed to undertake this responsibility and as a consideration for that the mortgagee executed the agreement in question
The portions of the document relevant for the present purpose are as follows
The mortgages are there described as the transactions of give and take 3 It is extremely necessary to explain beforehand the transaction of give and take outstanding between both of us 4 Whereas two transactions have been done between you and me
Therefore you have agreed to stand surety
And only for that reason I am executing this agreement and giving it to you in writing and thereunder I am settling and formulating some new terms and I am confirming some very terms which were declared before
5 Although in the matter of the transaction relating to the aforesaid mortgage deeds the rate of interest men tioned in the documents purporting to be the mortgage deeds is 14 annas per mensem per centum still the actual interest is to be received only at the rate of 8 annas per mensem per centum so it is settled between you and me and I have also agreed to the same
And even at that rate I have also been receiving the interest and I shall also receive hereafter 6 As regards the transaction of the second mortgage deed if as agreed at that time between you and me you pay me Rs 1800 in the lump then it will be understood that the transaction of give and take subsisting between you and me has been wholly completed and fully paid up
As you have no sufficiency of funds to make up and pay in full the above sum at once it is settled that you are to pay to me Rs 80 per 64 494 month and thus you are to make payment in full
In accord ance with the agreement arrived at between us both subse quent to the document purporting to be the second mortgage deed the said documents and papers and the written receipts in respect of interest given to you by me relating to the payment in full made by you in respect of interest and principal on account of the first transaction dated 7 4 31 have been kept with me
  8 As mentioned above vide paras 5 and 6 no interest of any nature whatever has remained claimable by me from you in accordance with the agreement arrived at between us both from the date of your suretyship onward and prior to it and in like manner I understand that the whole of the principal has been fully paid
10 If you so wish or if necessity may arise then at any time you may ask for it and I shall give you this agree ment on being written out on stamped paper and on being registered
 In our opinion this is a document which limits and extinguishes interests in immoveable property in the present within the meaning of section 171 b of the Indian Regis tration Act
Clause 4 of the agreement expressly says so
Referring to the two mortgages it says I am settling and formulating some new terms
 This speaks from the present
It does not say that this was some past agreement and that fact is underlined in the next sentence which reads and I am confirming some very terms which were declared before
 Among the new terms is the following
The rate of inter est agreed upon in the two mortgage deeds was 14 annas per cent per month
Clause 5 reduces this to 8 annas
It is true that according to clause 5 only 8 annas had actually been paid all along but that hardly 495 matters because the question is not what was paid but what was due and what the mortgagee could have enforced under his bond
It is evident from clause 4 that it was the agree ment embodied in the document which effected the change and therefore it was the document itself which brought the altered terms into being
The next question is whether this limits an interest in immoveable property
We are of opinion it does
We agree with the learned Rangoon Judges in U Po Thin vs Official Assignee1 that one part of the interest which a mortga gee has in mortgaged property is the right to receive inter est at a certain rate when the document provides for inter est
If that rate is varied whether to his advantage or otherwise then in our judgment his interest in the property is affected
If the subsequent agreement substi tutes a higher rate then to the extent of the difference it creates a fresh interest which was not there before
If the rate is lowered then his original interest is limited
The question of a higher rate was considered by their Lordships of the Privy Council in Tika Ram vs Deputy Commis sioner of Bara Banki2
There the mortgagors gave the mortgagees an unregistered rukka or written promise simulta neously with the registered mortgage stipulating that they would pay an extra 6 per cent per annum over and above the 15 per cent entered in the mortgage
their Lordships held that these rukkas could not be used to fetter the equity of redemption
They did not decide whether the personal cove nant in the rukkas could be enforced because that point had not been raised in the plaint and pleadings nor did they refer to the Registration Act but we think the words an unregistered instrument which the statute declares is not to affect the mortgaged property can only have reference to that Act
1 1938 RLR 293 AIR 1938 R 285
2 1899 26 IA 97 at 100
496 It was argued on the strength of Mahim Chandra Dey vs Ram Dayal Dutta1 Ram Ranjan vs Jayanti lal2 and Collec tor of Etah vs Kishori Lal3 that it is always open to a mortgagee to release or remit a part of the debt and when he does so he does not limit or extinguish an interest in immovable property any more than when he passes a receipt acknowledging payment of the whole or part of the money
The effect of the payment or of the release may be to extin guish the mortgage but in themselves they do not limit the interest
Extending this the learned counsel for the defendant contended that when a mortgagee agrees to accept a lower rate of interest he does no more than release that part of the debt which would be covered by the difference in rate
We do not agree
There is a difference between a re ceipt and a remission or a release
A receipt is not the payment nor does the document in such a case serve to extinguish the mortgage or limit the liability
It is the payment of the money which does that and the receipt does no more than evidence the fact
Not so a release
The extin guishment or diminution of liability is in that event ef fected by the agreement itself and not by something external to it
If the agreement is oral it is hit by proviso 4 to section 92 of the Evidence Act for it rescinds or modi fies the contract of mortgage
If it is in writing it is hit by section 17 1 b of the Registration Act for in that case the writing itself limits or extinguishes the liability under the mortgage
It is to be observed that when the mortgagor pays money due on the mortgage in whole or in part he is carrying out the terms of the bond and is not making any alteration in it and even though the fact of payment may limit or extin guish the mortgagee s interest that is only because the bond is working itself out by the force of its own terms and not by reason of some new agreement which seeks to modify it or limit or extinguish the interest which it creates
A simple test 1AIR 3 AIR 1930 All 721 at 725 FB 2 AIR 1926 Cal 906
497 is this see whether the mortgagee can in the face of the subsequent agreement enforce the terms of his bond
If he cannot then it is plain that the subsequent undertaking has effected a modification and if that has the effect of limiting or extinguishing the mortgagee s interest it is at once hit either by section 17 1 b or section 92 proviso 4
But when there is a mere payment of money that is done under the terms of the bond for the contract of mortgage postulates that the mortgagor should repay the money bor rowed and that when he does so the mortgagee s interest in the property shall be limited to the extent of the repay ment or when all is repaid be wholly extinguished nor of course does a payment have to be made by a written or registered instrument or even evidenced by one
Clause xi to section 17 2 of the Registration Act is based on this principle
It draws a distinction between a document which by the force of its terms
effects the extinguishment or purports to do so and one which merely evidences an exter nal fact which brings about that result
Now apply the test just given to the present case
Under the mortgages the mortgagee is entitled to interest at 14 annas per cent
per month but the mortgagor says he cannot claim that
Why  Because according to him the subsequent agreement altered the terms of the bond and reduced his liability to only 8 annas
It hardly matters what the agreement is called whether a release or a remission nor is it germane to the question that the mortgagee is enti tled to remit or release the whole or a part of the debt the fact remains that his agreement to do so effects an alteration in the original contract and by the force of its terms or extinguishes his interest Assume that the mortga gor repaid the whole of the interest at the altered rate and the whole of the principaL would those repayments by them selves effect an extinguishment of the mortgage  Clearly not because unless the subsequent agreement is called in aid more would be due under the terms of the bond on ac count of the higher rate of interest
It is evident then that it is the 498 agreement which limits the mortgagee s interest  and serves to extinguish the mortgage and not mere payment at the reduced rate
Similar observations apply to clause 6 of the agree ment
It begins by reciting a past agreement in which the mortgagor had promised to pay Rs 1800 in a lump sum
We are left to infer that this was to extinguish the mortgage
If it was then it would be hit by either section 92 provi so 4 of the Evidence Act or section 171b of the Regis tration Act but that does not matter because the present document varies even that agreement and substitutes a third agreement in its place namely that payment of Rs 1800 by instalments at the rate of Rs 80 a month will effect pay ment in full that is to say will extinguish the mortgage
This speaks from the date of the document for it says referring to this agreement that  it is settled etc
Next we come to clause 8
That refers us back to clauses 5 and 6 and says that as mentioned there no interest of any nature whatever has remained claimable by me and speaking of the principal says and in like manner I understand the whole of the prin cipal has been fully paid
We have already dealt with clauses 5 and 6
Clause 8 carries us no further and merely states that because of clauses 5 and 6 neither interest nor principal is now claimable and of course if neither interest nor principal is claimable that extinguish es the mortgage and in this case the extinguishment is brought about not by mere payment in accordance with the terms of the bond but because of the fresh agreement
Clause 10 remains for consideration
It was argued that this brings the matter within section 172 v of the Registration Act because it gives the defendant the right to obtain another document which will effect the extinguish ment
We do not agree because clause v of sub section 2 of section 17 of the Act postulates that the document shall not of itself create declare 499 assign limit extinguish any right etc and that it shall merely create a right to obtain another document etc
The stress is on the words itself and merely   We agree with Sir Dinsha Mulla at page 86 of the 5th edition of his Indian Registration Act that If the document itself creates an interest in immove able property the fact that it contemplates the execution of another document will not exempt it from registration under this clause
 As we have seen this document of itself limits or extinguishes certain interests in the mortgaged property
The operative words are reasonably clear
Consequently the document is not one which merely confers a right to obtain another document
It confers the right only in certain contingencies namely if you so wish or if necessity may arise
 Its purport is to effect an immediate alteration in the terms of the two bonds and because of that alteration to effect an immediate extinguishment and limitation
Clause 10 merely confers an additional right namely the right to obtain another document if you so wish or if necessity may arise Therefore the document in question is not one which merely creates a right to obtain another
An agreement to sell or an agreement to transfer at some future date is to be distinguished because that sort of document does not of itself purport to effect the trans fer
It merely embodies a present agreement to execute another document in the future which will when executed have that effect
The document in hand is not of that type
It does not postpone the effect of extinguishment or limita tion of the mortgages to a future date
It does not say that the agreement it embodies shall take effect in the future
It purports to limit and extinguish the liabilities on the two mortgages at once by virtue of the document itself and merely adds that if it is necessary or should you want another document I will repeat the present 500 agreement in a registered agreement
 By implication it means that if it is not necessary or if the mortgagor does not want a registered instrument the document itself will have effect
Incidentally one effect of holding that this document does not limit or extinguish the mortgagor s li ability would be that there is no agreement to that effect yet in force This may or may not give the mortgagor a right to obtain specific performance of his right to obtain such an agreement but until he does that there would be no bar to the mortgagee s claim in this suit
However it is not necessary to go as far as that because we are of opinion that this document is not exempt from registration under section 172 v and we so hold
The next question is whether the document can be used in evidence under the proviso to section 49 of the Registration Act
We are clear it cannot
This is not a suit for specif ic performance nor does any question of part performance under section 53A of the Transfer of Property Act arise
It remains then to be seen whether the use now sought to be made of the document is to evidence a collateral transaction not required to be evidenced by a registered instrument
But what is the transaction sought to be proved but the very agreement which the document not merely evidences but by reason of its own force creates  That is not a collat eral transaction and even if it were a transaction of that type it would require a registered instrument for the reasons we have already given
Section 53A of the Transfer of Property Act was re ferred to but it has no application for the agreement we are concerned with is not a transfer
There are no words of conveyance in it also the mortgagor is not continuing in possession in part performance of the contract
Both mort gages were simple and the right to possession never resided in the mortgagee
He might in due course have acquired it by process of law if he obtained a decree and purchased at the sale on the other hand a stranger might have purchased and the right to possession would in that event have passed elsewhere But he had no right to possession at the 501 date of the agreement and having none he could not have transferred it
The mortgagor s possession was consequently not referable to the agreement
The appeal fails and is dismissed with costs
Appeal dismissed


Summary:
The Government appointed temporary junior professors in different law colleges in the State under Rule 10a11 of the TamilNadu State and Subordinate Services Rules 1955 during 1971 1982
In 1979 the State Public Service Commission invited applications for regular appointment of junior professors
The temporary junior professors and others applied for the posts
The Commission selected 25 candidates out of whom 21 were already working as temporary junior professors
On 1681983 the selected candidates were arranged in the list called approved list in the order of merit prepared by the Commission which was approved by the Government on 9121983
On 2761985 the State Government regularised the serv ices of the 21 junior professors with effect from the dates of original appointments as temporary junior professors
Some of the junior professors were promoted on 1091986 and appointed as professors
The respondents challenged that promotion before the
High Court contending that once the temporary services were regularised retrospectively with effect from the date of entry in the service the seniori ty should he reckoned by glvlng the benefit of regularised service notwithstanding the ranking in the approved list
The High Court allowing the writ petitions directed the Govern 619 ment to make a proper order of promotion in the light of the views expressed in the judgment against which appeals were made in this Court
Allowing the appeals this Court HELD 1
The order of regularisation of the services of the candidates expressly States that the inter se seniority of the candidates would be in accordance with the rankings in the approved list prepared by the Public Service Commis sion and will not be affected in any way by the date of regularisation of services
When the order of regularisation of temporary service itself denies such service for the purpose of determining seniority the Court cannot count that service for the purpose of seniority
625B C 2
Since the parties in these cases appeared for selec tion before the Public Service Commission for regular re cruitment as Junior professors the list of approved candi dates prepared by the Public Service Commission in the order of merit and accepted by the Government should be the basis for the determining inter se seniority
It is not open to the parties to claim that their temporary service aS junior professors upon regularisation should be counted for the purpose of determining the seniority in the cadre
625D E 3
Rule 10ai1 provides for making of temporary appointments
Such appointments are made otherwise than in accordance with the procedure prescribed under the Rules
625H 626A 4
In the instant case the respondents were appointed temporarily and otherwise than in accordance with the Rules
They were later selected along with others for direct re cruitment by the Public Service Commission
They were not entitled to count the temporary service for seniority
The services rented by the applicants under Rule 10ai1 cannot be considered for the purpose of seniority as such appointment is a matter of stop gap emergency or fortuitous arrangement
Even though their temporary services have been regularised since regularisation was only for limited purposes
626A C APM Mayakutty etc
vs Secretary Public Service Department etc
 at 942 followed
The services rendered in the temporary post is avail able either for earning increments or for commencement of probation
625E F 620