dedol-hf/india-case-legal-rag huggingface dataset:
in  the Indian Constitution in which Rajasthan is  included.
It is to be noted that the Extradition Act itself, which  is
made  applicable to the United State of Rajasthan,  contains
an express provision in section 18 which safeguards   exist-
ing treaty rights.  It is somewhat unusual that an  Extradi-
tion  Treaty  would be subsisting even after the  State  had
acceded  to  India but we have no materials before  us  upon
which  we  could definitely  hold that the Treaty  has  been
expressly superseded or abrogated by the Indian Legislature.
    The  next important thing is that in April, 1948,  there
was  a  Covenant entered into by the Rulers of  nine  States
including  Tonk, by which it was agreed by and  between  the
covenanting  parties   that  the territories of  these  nine
States  should be integrated into one State by the  name  of
the  United  State  of Rajasthan.  This was  done  with  the
concurrence of the Dominion of India.  Later on, on 12th  of
May,    1949, Mewar also became a party to this Covenant and
the  United  State  of Rajasthan was  reconstituted  by  the
integration of the territories of all the ten States. By the
Covenant  of Merger, the Covenanting States agreed to  unite
and  integrate their territories in one State known  as  the
United  State of Rajasthan and to have a  common  executive,
legislature  and  judiciary. The Rulers of  all  the  States
became  members of the Council of Rulers and  the  President
was  designated  as  the Raj Pramukh of  the  United  State.
Article VI of the Covenant of Merger runs as follows:
   "(1)  The Ruler of each Covenanting State shall, as  soon
as practicable and in any event not later than the first day
of  May, 1948, make over the administration of his State  to
the Raj Pramukh; and thereupon --
590
    (a) all rights, authority and jurisdiction belonging  to
the  Ruler which appertain or are incidental to the  Govern-
ment of the Covenanting State shall vest in the United State
and shall hereafter be exercisable only as provided by  this
Covenant or by the Constitution to be framed thereunder;
    (b) all  duties  and  obligations  of the Ruler pertain-
ing or incidental to the Government of the Covenanting State
shall devolve on the United State and shall be discharged by
it; and
    (c)  all the assets and liabilities of  the  Covenanting
State  shall  be the assets and liabilities  of  the  United
State."
The   question  now  is how far  was   the   Extradition
Treaty  between  the Tonk State and the  British  Government
affected  by  reason  of the merger of the  State  into  the
United  State  of Rajasthan. When a State  relinquishes  its
life  as  such through incorporation into or  absorption  by
another State either voluntarily or as a result of  conquest
or annexation, the general opinion of International  Jurists
is that the treaties of the former are automatically  termi-
nated.  The result is said to be produced by reason of  com-
plete loss of personality consequent on extinction of  State
life(1).  The cases discussed in this connection are  gener-
ally  cases where independent States have ceased to be  such
through constrained or voluntary absorption by another  with
attendant  extinction  of the former's treaties  with  other
States.   Thus  the forceable incorporation of Hanover  into
the  Prussian  Kingdom destroyed the  previous  treaties  of
Hanover.   The admission of Texas into the United States  of
America by joint resolution extinguished the Treaties of the
Independent Republic of Texas(2).  The position is the  same
when Korea merged into Japan.  According to Oppenheim, whose
opinion  has been relied upon, by Sir Alladi, no  succession
of  rights and duties ordinarily takes place in such  cases,
and as political and personal treaties presuppose the exist-
ence of a contracting State,
(1)  Vide Hyde on International Law, Vol. III, p. 1529.  (2)
Vide Hyde on International Law, Vol. II1, p. 1531,
591
they  are altogether extinguished.  It is a debatable  point
whether succession takes place in cases of treaties relating
to  commerce or extradition but here again the  majority  of
writers  are of opinion that they do not survive  merger  or
annexation(1).
    The  remarks  quoted above do not, however,  seem  quite
appropriate to a case of the present description. Here there
was no absorption of one State by another which would put an
end  to  the  State life of the former  and  extinguish  its
personality.   What  happened here was that  several  States
voluntarily united together and integrated their territories
so  as to form a larger and composite State of  which  every
one of the covenanting parties was a component part.   There
was  to be one common executive, legislature  and  judiciary
and the Council of Rulers would consist of the Rulers of all
the Covenanting States.  It may not be said, therefore, that
the Covenanting States lost their personality altogether and
it is to be noted that for purposes of succession of  Ruler-
ship  and for counting votes on the strength  of  population
and  other  purposes  the Covenant of  Merger  recognises  a
quasi-separation  between the territories of  the  different
States.   But although such separation exists for some  pur-
poses  between one State territory and another, it is  clear
that  the  inhabitants of all the different  States  became,
from the date of merger, the subjects of the United State of
Rajasthan and they could not be described as subjects of any
particular State.  There is no such thing as subject of  the
Tonk State existing at the present day and the Ruler of Tonk
cannot independently and in his own right exercise any  form
of  sovereignty  or control over the  Tonk  territory.   The
Government,  which exercises sovereign powers, is only  one,
even though the different Rulers may have a voice in it.  It
seems to us that in those altered circumstances the Extradi-
tion  Treaty  of    1869 has become  entirely  incapable  of
execution.  It is not possible for the Tonk State, which  is
one of the contracting parties to act in accordance with the
terms of the treaty, for it has no longer any independent
(1) Oppenheim on International Law, Vol. I, p. 152,
592
authority  or sovereign rights over the Tonk  territory  and
can  neither make nor demand extradition.  When as a  result
of amalgamation or merger, a State loses its full and  inde-
pendent power of  action over the subject-matter of a treaty
previously   concluded,   the  treaty    must    necessarily
lapse(1).    It  cannot be said that the sovereignty of  the
Tonk State in this respect is now vested in the United State
of  Rajasthan.  The  authority, so far  as  extradition  was
concerned,  was  already surrendered by the  Tonk  State  in
favour  of  the  Dominion Government by  the  Instrument  of
Accession.  But even assuming that these treaty rights could
devolve  upon  the United State of Rajasthan  by  reason  of
article 6 of the Covenant of Merger, the latter, it seems to
me, could be totally incapable of giving effect to the terms
of the treaty.  As has been said already, there could be  no
such  thing  as a subject of the Tonk State at  the  present
moment and article 2 of the Treaty which provides for extra-
dition of Tonk subjects accused of having committed  heinous
offences within Tonk territory and seeking asylum  elsewhere
would be wholly infructuous.  The United State of  Rajasthan
could  not possibly demand extradition on the basis of  this
article,  and  if reciprocity, which is the  essence  of  an
Extradition Agreement, is gone, the Treaty must be deemed to
be void and inoperative.
    The  decision in Terlinden v. Ames (2) which was  relied
upon by Sir Alladi in course of his arguments, rather forti-
fies  the  view that I have taken.  The question  there  was
whether an Extradition Treaty between Prussia and the United
States of America, which was entered into in 1852, could  be
given effect to after the incorporation of Prussia into  the
German Empire. The question was answered in the affirmative.
It  was pointed out inter alia that the Constitution of  the
German  Empire left sufficient independent power and  sover-
eignty  to the States composing the confederation to  enable
them to act upon these treaties and it was observed by Chief
Justice Fuller, who delivered the opinion of the Court, that
where sovereignty in respect
(1)  Vide Hyde on International Law, Vol. III. p. 1535.  (2)
184 U. S. 270.
593
to  the  execution of treaties is not extinguished  and  the
power  to execute remains unimpaired,  outstanding  treaties
cannot be regarded as void.  This is the real criterion  and
as  obviously  the power of the Tonk State  to  execute  the
treaty is altogether gone after the Covenant of Merger,  the
treaty cannot but be regarded as void.
The other case cited by Sir Alladi, viz., that of Lazard
Brothers  v. Midland Bank Ltd.(1) has absolutely no  bearing
on this point. It laid down the well accepted proposition of
International Law that a change in the form of government of
a  contracting  State does not put an end to  its  treaties.
The treaty entered into by the Czarist Russia could be given
effect to after the Revolution, once the new government  was
recognised as a person in International Law.
My conclusion, therefore, is that the Extradition Treaty
between the Tonk State and the British Government in 1869 is
not  capable of being given effect to in the present day  in
view of the merger of the Tonk State in the United State  of
Rajasthan.   As  no treaty rights exist, section 18  of  the
Indian  Extradition Act has no application and section 7  of
the  Act  has been complied with, there is  no  ground  upon
which we can interfere.
    In  view of my decision on the first point,  the  second
point  does  not require determination and  I  refrain  from
expressing any opinion upon it.
In the result, the appeal fails and is dismissed.
    DAS  J  I substantially agree with the reasonings  given
in the judgment just delivered by my learned brother Mukher-
jea and concur in dismissing this application.
Appeal dismissed.
Agent  for  the appellant: Rajinder Narain.  Agent  for  the
respondent: P.A. Mehta.
594
PETITIONER:
RACHPAL MAHRAJ
        Vs.
RESPONDENT:
BHAGWANDAS DARUKAand OTHERS
DATE OF JUDGMENT:
05/05/1950
BENCH:
SASTRI, M. PATANJALI
BENCH:
SASTRI, M. PATANJALI
KANIA, HIRALAL J. (CJ)
DAS, SUDHI RANJAN
CITATION:
 1950 AIR  272            1950 SCR  548
 CITATOR INFO :
 R          1965 SC1591  (7,9)
 E          1970 SC 659  (8,23)
 F          1971 SC 613  (17,18)
ACT:
    Indian  Registration Act (XVI of 1908), s.  17--Transfer
of  Property  Act  (IV of 1882), s.  58  (f)--Memorandum  of
deposit of title deeds--When compulsorily registrable.
HEADNOTE:
    The  question whether a memorandum of deposit  of  title
deeds  is compulsorily registrable under section 17  of  the
Indian Registration Act, 1908, as an instrument creating  an
interest  in  immoveable property, depends  on  whether  the
parties  intended  to  reduce their  bargain  regarding  the
deposit  to  the  form of a document . If  so  the  document
requires  registration.  If, on the other hand,  its  proper
construction  and the surrounding circumstances lead to  the
conclusion  that the parties did not intend to do so,  there
being  no express bargain, the contract to create the  mort-
gage  arises  by  implication of the law  from  the  deposit
itself  with  the  requisite intention,  and  the  document,
being merely evidential does not require registration.   The
time factor is not decisive.
Where accounts relating to the appellant's dealings  with
the respondents were taken on a certain date and the  appel-
lant  gave certain title deeds to the respondents for  being
held  as security for the amounts then found due  and  which
may  become due, and on  the same day the appellant  gave  a
memorandum  to the respondents in the form of a  letter  ad-
dressed to the respondents which stated: "We write to put on
record that to secure the repayment of the money already due
to  you  from  us on account of  the  business  transactions
between  yourselves  and ourselves and the  money  that  may
hereafter become due on account of such transactions we have
this day deposited with you the following title deeds relat-
ing to our properties at...with intent to create an  equita-
ble  mortgage  on the said properties to secure  all  moneys
including  interest that may be found due  ...."
Held that the parties did not intend to create charge by the
execution   of  the  document,  but  merely  to   record   a
transaction  which  had already been  concluded  and   under
which  rights and liabilities had already been  created  and
the document did not require registration.
549
    Obla Sundarachariar v. Narayana Ayyar  (53 I. A, 68) and
Hari  Sankar Paul v. Kedar Nath Saha (66 I.A. 184)  referred
to.
JUDGMENT:
    APPEAL (Civil Appeal No., LXVII of 1949) from a Judgment
and  Decree of the High Court of Judicature at  Patna  dated
the 11th March, 1947, in F.A. No. 218 of 1944. The  material
facts appear from the judgment.
    Shiva Prasad Sinha (Sri Kishan, with him) for the appel-
lant.
B.K.  Saran for the 1st respondent. Respondents 2 to 13  did
not enter appearance.
    1950. May 5.  The judgment of the Court was delivered by
    PATANJALI  SASTRI J.--This appeal arises out of  a  suit
brought  by the respondents against the appellant and  other
members of his joint family to enforce a mortgage alleged to
have been created by the appellant by deposit of title deeds
on the 23rd October, 1936, at Calcutta.
    The  short  point  for determination in  the  appeal  is
whether the memorandum signed and delivered by the appellant
on 23rd October, 1936, and relied upon by the respondents as
evidencing  the  creation of the mortgage  was  compulsorily
registrable under section 17
    of  the Indian Registration Act, 1908, and,  not  having
been  registered, was inadmissible in evidence to prove  the
mortgage.  The Subordinate Judge of Darbhanga who tried  the
suit,  and the High Court at Patna on appeal, held that  the
document did not require registration and was admissible  in
evidence, and accordingly decreed the suit.
    The  question  turns on the proper construction  of  the
memorandum  and the circumstances under which it was  deliv-
ered  to the respondents.  According to the evidence of  the
respondents'   witnesses  which  has been  accepted  by  the
Courts  below,  the  accounts relating  to  the  appellant's
dealings  were  examined on the 23rd October,  1936,  and  a
large  sum  was found due to the  respondents  who  demanded
payment.   The appellant thereupon brought and gave  certain
documents, being
550
title  deeds relating to immovable properties  belonging  to
his  family, for the purpose of being held as  security  for
the amounts then due and to become due on further  dealings.
A draft of the memorandum was thereafter prepared which  the
appellant  took  with him to be shown to his lawyer  and  he
returned  in the afternoon, and signed and delivered  it  to
the  respondents.   All this took place  in  Calcutta.   The
memorandum  is  in  the form of a letter  addressed  to  the
respondents' firm and is in the following terms:
  "  We write to put on record that to secure the  repayment
of  the money already due to you from us on account  of  the
business  transactions between yourselves and ourselves  and
the  money that may hereafter become due on account of  such
transactions we have this day deposited with you the follow-
ing title deeds in Calcutta at your place of business at No.
7 Sambhu Mallick Lane, relating to our properties at  Samas-
tipur  with intent to  create  an  equitable mortgage on the
said  properties  to secure  all moneys  including  interest
that may be found due and payable by us to you on account of
the said transactions  .......  "
A  mortgage by deposit of title deeds is a form of  mortgage
recognised  by  section  58 (f)  of  the  Transfer        of
Property  Act  which  provides that it may  be  effected  in
certain  towns (including Calcutta) by a person  "delivering
to his creditor or his agent documents of title to immovable
property with intent to create a security thereon." That  is
to say, when the debtor deposits with the creditor the title
deeds of his property with intent to create a security,  the
law  implies  a  contract between the parties  to  create  a
mortgage,  and  no registered instrument is  required  under
section  59 as in other forms of mortgage.  But if the  par-
ties  choose to reduce the contract to writing,the  implica-
tion is excluded by their express bargain, and the  document
will be the sole evidence of its terms.  In such a case  the
deposit  and  the document both form integral parts  of  the
transaction and are essential ingredients in the creation of
the  mortgage.   As  the deposit alone is  not  intended  to
create the charge and the document, which
551
constitutes  the  bargain regarding the  security,  is  also
necessary  and operates to create the charge in  conjunction
with the deposit, it requires registration under section  17
of the Indian Registration Act, 1908, as a  non-testamentary
instrument creating an interest in immovable property, where
the  value  of such property is one hundred rupees  and  up-
wards. The time factor is not decisive.  The document may be
handed  over to the creditor along with the title deeds  and
yet  may  not be registrable, as in Obla  Sundarachariar  v.
Narayana Ayyar (1).  Or, it may be delivered at a later date
and  nevertheless be registrable, as in Hari Sankar Paul  v.
Kedar  Nath  Saha  (2).  The crucial question  is:  Did  the
parties intend to reduce their bargain regarding the deposit
of  the title deeds to the form of a document ? If  so,  the
document requires registration.  If, on the other hand,  its
proper  construction and the surrounding circumstances  lead
to the conclusion that the parties did not intend to do  so,
then, there being no express bargain, the contract to create
the  mortgage  arises  by implication of the  law  from  the
deposit  itself with the requisite intention, and the  docu-
ment, being merely evidential does not require registration.
    There are numerous decisions, some of them not  easy  to
reconcile, where this question was considered with reference
to  the  document concerned in the particular  case.  It  is
unnecessary to review them, as the two latest pronouncements
of  the  Privy Council, to which reference  has  been  made,
aptly  illustrate cases falling on either side of the  line.
In Obla Sundarachariar v. Narayana Ayyar (1) a signed  memo-
randum  was delivered to the mortgagee along with the  title
deeds  of  certain  properties deposited  as  security.  The
memorandum stated' 'As agreed upon in person, I have  deliv-
ered to you the under-mentioned documents as security,"  and
listed  the  title deeds deposited.  It was  held  that  the
memorandum was no more than a mere record of the particulars
of  the deeds and did not require registration.  The  crite-
rion  applied  was: "No such memorandum can  be  within  the
section  (section 17 of the Registration Act) unless on  its
face   it   embodies   such   terms   (1)   58   I.A.    68.
(2) 66 I.A.. 184.
S52
and  is signed and delivered at such time and place  and  in
such circumstances as to lead legitimately to the conclusion
that, so far as the deposit is concerned, it constitutes the
agreement  between  the parties."  In Hari  Sankar  Paul  v.
Kedar Nath Saha (1) the title deeds were deposited  accompa-
nied  by a memorandum when part of the advance arranged  for
was  made.  Some days later when the balance  was  advanced,
another  memorandum  was delivered superseding  the  earlier
one,  and this was a formal document stating  the  essential
terms of the transaction "hereby agreed" and referred to the
moneys "hereby secured".  It also conferred an express power
of  sale on the mortgagee. Lord Macmillan,  after  reviewing
the  earlier decisions of the Board, held that the  document
required  registration,  observing,  "where,  as  here,  the
parties  professing  to create a mortgage by  a  deposit  of
title  deeds  contemporaneously  enter  into  a  contractual
agreement, in writing, which is made an integral part of the
transaction,  and is itself an operative instrument and  not
merely evidential, such a document must, under the  statute,
be registered."
    Turning now to the memorandum before us, it is clear, on
the  face of it, that the parties did not intend thereby  to
create  the charge.  The document purports only to record  a
transaction  which  had been concluded and under  which  the
rights  and  liabilities had been orally  agreed  upon.   No
doubt it was taken by the respondents to show that the title
deeds of the appellant's properties were deposited with them
as security for the moneys advanced by them, and to  obviate
a possible plea that the deeds were left with them for other
purposes,  as indeed was contended by the appellant  in  his
written statement, taking advantage of the  non-registration
of the memorandum in question.  But that is far from intend-
ing  to reduce the bargain to writing and make the  document
0the basis of the rights and liabilities of the parties.  In
agreement with ,the High Court, we are of opinion,. that the
memorandum  delivered by the appellant along with the  title
deeds
(1) 66 I.A. 184.
553
deposited,with the respondents did not require  registration
and was properly admitted in evidence to prove the  creation
of the charge.
The appeal fails and is dismissed with costs.
Appeal dismissed.
Agent for the appellant: Tarachand Brijmohanlal.  Agent  for
respondent No.1: S. P. Varma.
PETITIONER:
NANALAL ZAVER AND ANOTHER
        Vs.
RESPONDENT:
BOMBAY LIFE ASSURANCE CO. LTD.AND OTHERS
DATE OF JUDGMENT:
04/05/1950
BENCH:
KANIA, HIRALAL J. (CJ)
BENCH:
KANIA, HIRALAL J. (CJ)
FAZAL ALI, SAIYID
SASTRI, M. PATANJALI
MAHAJAN, MEHR CHAND
DAS, SUDHI RANJAN
MUKHERJEA, B.K.
CITATION:
 1950 AIR  172            1950 SCR  391
 CITATOR INFO :
 R          1964 SC 136  (11)
 E&R        1981 SC1298  (64,109,110,111)
ACT:
MUKHERJEA and DAs, JJ.]
$
Indian    Companies    Act    (VII    of    1913),    s.
105-C--Company--Outsider trying to get control of management
by purchasing shares --Issue of further shares--Offer of new
shares to existing share holders--Validity of resolution and
offer--Company  in   need  of  funds--Additional  motive  to
prevent    outsider   getting   control--Bona    fides    of
resolution--Scope of 8. 105-C.
HEADNOTE:
    A  company was incorporated with a capital divided  into
10,000 shares.  After 5,404 shares had been subscribed,  the
directors of the company, finding that a businessman who had
several other businesses and who was likely to use the funds
of  this company for his own businesses, was trying  to  get
control  of this company by purchasing its shares,  resolved
to issue the remaining 4,596 shares and offered these shares
to  the existing shareholders in the proportion of four  new
shares for every five shares held by them. Two of the share-
holders of the company instituted a suit against the company
and the directors for the following reliefs: (i) a  declara-
tion  that the resolution of the directors and the offer  of
shares  contravened the provisions of section 105-C  of  the
Indian  Companies Act, 1913, and was therefore  ultra  vires
and  illegal;  (ii) a declaration that the offer  of  shares
was  not made bona fide or in the interests of  the  company
and was therefore illegal; and (iii) to restrain the defend-
ants from allotting any shares in pursuance of their offer:
    Held  per KANIA CI.J., MAHAJAN, MUKHERJEA and  DAS  JJ.-
that  inasmuch  as  the shares resolved to  be  issued  were
offered  to the existing shareholders only, and not  to  any
outsider and these shares were also offered to the  existing
shareholders in proportion to the shares held by each member