Case: Chidambaraiyer And Others Vs. P. S. Renga Iyer And Others

2. On August 18, 1930, the predecessors-in-interest of the appellants executed a registered deed of usufructuary mortgage in favour of the family of Samu Pattar for Rs. 31,000/- No interest was stipulated in the document but the mortgagee was put in possession of the mortgage property. The mortgagee had to enjoy the income from the said property, and after appropriating interest due on the mortgage and after paying the revenue and the jenmis purappad, he was to pay to the mortgagors one edangali of paddy every year within the 30th of Makarom. The mortgage was redeemable after the expiry of 60 years from the date of the mortgage. The 11th appellant and his deceased father, Narayana Iyer, filed O. P. No. 43 of 1949, on the file of the Court of Subordinate Judge, Palghat, under Ss. 9-A and 19-A of the Act for scaling down the mortgage debt thereunder. To that petition appellants 1 to 10 and others mortgagors were impleaded as respondents 2 to 14, and the mortgage, as the first respondent. As the said first respondent-mortgagee raised the plea that the mortgage interest had been set apart by the members of his family to a charity, respondents 15 and 16, who were the seniormost male members of their respective branches of the mortgagee-family were also impleaded as respondents to the said petition3. The contesting respondents, inter alia, raised two pleas, namely, (1) the mortgage property was transferred in trust to the charity for valuable consideration and, therefore, S. 9-A (10) (ii) (b) of the Act was attracted and hence the mortgage was not liable to be scaled down under the Act; and (2) the said mortgage right was the subject-matter of a partition amongst the several members of the joint family consisting of respondents 1, 15, 16 and others and, therefore, the said mortgage was exempted under S. 9-A (10) (ii) (c) of the Act from its operation4. On the first question the learned Subordinate Judge held that "The transferee, viz., the charity, not being a transferee for valuable consideration" the proviso to S. 9-A (10) (ii) (b) did not apply; and on the second question he held that the partition of the family in the sense of division in status was effected before the relevant period and that apart, as the mortgage interest of the family was not allotted to some or one of the members of the family but a trust was created in respect thereof in favour of a charity, S. 9-A (10) (ii) (c) had no application. In the result he allowed the petition and granted a certificate to the petitioners and respondents 2 to 14 to the effect that the amount due under the mortgage on the date he made the order was Rs. 8,788-14-105. As the first respondent died pending the proceedings in the Court of the Subordinate Judge, the 17th respondent, his younger brother, was brought on record in his place6. Against the order of the learned Subordinate Judge, the 17th respondent preferred an appeal to the High Court of Judicature at Madras, being A. A. O. No. 577 of 1952. To that appeal, the petitioners and other respondents were made respondents. On the first question, the High Court held that the family transferred the mortgage interest for valuable consideration in favour of the charity within the meaning of para. (b) S. 9-A (10) (ii) of the Act; and on the second question it held that the expression "partition" in S. 9-A (10) (ii) (c) meant partition by metes and bounds and though it was effected during the relevant period the mortgage interest in the property was not the subject of partition and, therefore the said provision was not attracted to the mortgage in question. In the result, the High Court, disagreeing with the view expressed by the learned Subordinate Judge, set aside the order made by him and dismissed the petition filed by the mortgagors for scaling down the debt. Against the said order the mortgagors have preferred, on a certificate issued by the High Court, the present appeal to this Court.

Court's reasoning:
Later on the learned Judges proceed to state:"We are unable to accept the arguments for the reasons stated already. It is clear as were have referred to already that for the amounts entered as credit in the family business account which was a liability payable by the family from and out of the interest under Exhibit B-1 the religious functions have to be performed and that there was a substitution of the mortgage amount under Exhibit B-3. Mr. Ramachandra Aiyar contends that there is no oral evidence about that substitutions; nor is it possible to conclude from the meagre and scanty documentary evidence let in that there has been any such substitution. The answer to this argument is that the credit amount in favour of Kolathu Iyen is only a ledger entry making the liability on the family with regard to a sum of money out of which certain charities have to be performed. In Exhibit B-3 we do not find any credit entry in the name of Kolathu Iyen as well as patasala account. Those liabilities must be deemed to have been discharged by item 1 in Exhibit B-2 namely, the mortgage amount. The result is the discharge of one liability by another and we are unable to see that such a state of things would not amount to a transfer."These observations also make it clear that the learned Judges clearly held that the mortgage interest in Ex. A-1 was transferred in discharge of the liability undertaken under Ex. B-1. But strong reliance was placed by the learned counsel for the appellants on the following concluding observation of the learned Judges :"In the present case the joint family has lost the mortgage interest and the trust has gained that interest. Therefore the transfer under Ex. B-3 must be deemed to be for valuable consideration."Relying upon this observation the learned counsel commented that the learned Judges held that a mere transfer of an interest in favour of another was in itself a transfer for valuable consideration. To accept this argument is to ignore the elaborate discussion that preceded the said observation and the relevant extracts from the judgment we have extracted earlier. In the context of the preceding discussion the said observation can only mean that the transfer in favour of a charity is discharge of the earlier obligation is a transfer for valuable consideration. Agreeing with the High Court, we hold that there was a transfer of the mortgage interest under Ex. A-1 in trust to a charity in discharge of an earlier obligation undertaken by the family to set apart a sum of Rs. 36,988-9-8 in favour of the charity. Under para, (b) of S. 9-A (10) (ii) of the Act, to attract that provision the transfer shall be for a valuable consideration. The short question, therefore, is whether the transfer in trust of a property in discharge of an earlier obligation was for valuable consideration within the meaning of para (b) of S. 9-A (10) (ii) of the Act. So stated there can only be one answer. The classic definition of "valuable consideration" is given in Currie v. Misa, (1875) 10 Ex. 153 at p. 162, thus : "A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility, given suffered or undertaken by the other"Section 2(d) of the Contract Act defines consideration thus:"When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing something such act or abstinence or promise is called a consideration for the promise."So far as is relevant to the present enquiry, the content of the two definitions is practically the same, though the expression "valuable" is implied under S. 2(d) of the Contract Act, for consideration shall be "something which not only parties regard but the law can regard as having some value". From the definitions it is apparent that consideration may be negative or positive. In the present case the mortgage interest was transferred in trust to the charity. What was the consideration that passed from the charity to the family? The family was under an obligation to pay to the charity the amount set apart to it under Ex. B-1. The mortgage interest was transferred in discharge of that obligation. That is to say, the charity agreed as a consideration for the transfer of the mortgage interest not to enforce its right to recover that amount from the family. The charity gave up that right in consideration of the mortgage interest acquired by it. We therefore, hold that the family transferred the mortgage interest in trust to the charity for valuable consideration within the meaning of S. 9-A (10) (ii) (b) of the Act. It follows that the mortgage, Ex. A-1, was rightly held by the High Court not liable to be scaled down under the provisions of the Act15. In the reply the learned counsel for the appellants sought to raise another plea, namely, that there was no valid transfer of the mortgage deed in favour of the charity inasmuch as the said transfer was not effected by the registered document. This plea was not raised at any stage of the litigation, presumably because Ex. B-3 was a registered document. We cannot, therefore, permit the appellants to raise the plea for the first time before us.