P L D 1966 (W (PLP)

17. For the purposes of dealing with the arguments advan ced by the learned counsel for the defendants reliance is placed on section 25 (1) (h) of the National Bank of Pakistan Ordinance, 1949, which reads as under:‑ "(25) The Bank is authorised to carry on and transact the several kinds of business hereinafter specified:‑-- (1) the advancing and lending of money and opening of cash, credits upon the security of‑ (h) immovable property or documents of title relating thereto as collateral security only where the original security is one of those specified in sub‑clauses (a) to (f), and subject to such directions as may be issued by the Central Board where the original security is of the kind specified in sub‑clause (g)." It is being contended that under clause (h) of section 25 (1y of this Ordinance the deposit of title deed in respect of Iqbal Manzil ; could be made if this security were to be treated as collateral and if the original security was one which is specified in sub‑clauses (a) to (f). It is argued that the original security being non‑existent on the day this alleged collateral security of deposit by way of title deeds regarding Iqbal Manzil was made, the collateral security could not be taken. The deposit of title deeds with a view to creating equitable mortgage of Iqbal Manzil thus according to the learned counsel for the defendants was contrary to the provisions contained in section 25(1)(h) of this Ordinance. That being so, it was further argued that section 26 of this very Ordinance would be a ban on the bank against transacting business contrary to what is contained in section

25. The learned counsel for the plaintiffs has repelled this argument by saying that the case of the plaintiffs would be covered by section 25 (1)(c) and (g) in that the pledge of hide, skins, etc., made to the plaintiffs by defendant 2 earlier would be covered by section 25 (1) (c) and (g). I do not agree with what the learned counsel for the plaintiffs has argued. Clause (h) of section 25 (1) authorises that a collateral security be taken by deposit of title deeds only. The word `collateral itself connotes that security which is collateral must co‑exist with the original security `~ taken earlier in point of time. The question of collateral security conceivably cannot arise in the event of original security being non‑existent on the day on which the collateral security is taken. Under these circumstances, I see no force in the argument of the learned counsel. He has, however, further argued that section 25 merely requires of the bank not to advance monies unless comp liance is made of what is contained in its clauses (a) to (g) but that this section nowhere prohibits taking of collateral security to secure money already advanced on security in accordance with clauses (a) to (g) and the security so taken having disap peared before the collateral security is taken. I have thought on this argument cooly and I find that there is substance in it. B In the total absence of a prohibition on security being taken to have the advance already made secured, the taking of the security by way of deposit of title deeds, in my opinion, will note be in violation of what is contained in Ordinance XIX of 1949. In support of this view, reference can be made to Ebrahim Azeem v. William Dickson Cruickshand (16SWR203). The relevant portion is reproduced hereunder:‑- "But if the security was given to secure a debt already incurred and due, we do not think that the taking it was ultra vires. It is one thing to say that the Bank shall not make a business of lending money on mortgage of land and the like, and another thing to say that money being actually due and owing to the Bank, the Bank shall not take the security of land or other immovable property, or any other kind of good security not expressly prohibited, with a view to its own protection. The original lending of money on the security of immovable property is quite a different thing (and affects the general position and business of a Bank quite differently) from taking such security for a debt due. The forbidding the entering into loan transactions on the strength of such security, does not appear to us necessarily to include a prohibi tion against taking such security as a protection against loss in respect of a debt due; and, in the absence of any express prohibition, we do not see why we should infer an intention to impose it, when very possibly, not to say probably, it was never intended that it should be either expressed or implied. Prima facie, a debt having been actually incurred, it appears to us to be clear gain to the creditor to get any security for it, whether by way of mortgage or otherwise; and we think that the taking of such 'security bona fide, is within the general scope of the business of the Bank of Bengal, as it is not expressly declared not to be so." , Under the circumstances my own view is that the deposit of title deeds is not contrary to what is contained in Ordinance XIX of 1949.

18. With regard to whether document, Exh. 54 would require registration, the argument of the learned counsel is that this document in itself purports to create the mortgage and therefore requires registration. He has cited numerous cases to enunciate that where a document purports to be a deed of mortgage, it would require registration. There can be no dispute about this proposition. If this document, Exh. 54, could be construed to be a mortgage deed then obviously it would require registration and the same having not been registered will be inadmissible in evidence. But the point that needs consideration really is whether this document is a mortgage deed or a memorandum of deposit of title deeds. My own view in the matter is that it is merely a memorandum of deposit of title deeds and not the mortgage deed. The main consideration is as to whether the mortgage created by the document, Exh. 54, was created prior in time to the document, Exh.

54. This question is effectively considered by reference to Exh. 118 which was written on the same day on which Exh. 54 was written but earlier in point of time. In Exh. 118 defendant No. 2 had requested the plaintiffs to pay off his Habib Bank debt and to keep the title deeds in deposit with them. The equitable mortgage was created after Exh. 118 was written and was followed by the letter, Exh.

54. Here it will be necessary to go through Exh.

54. It reads as under: Fahim & Company 17th June, 1952. The Manager, National Bank of Pakistan, Local Principal Office, Karachi, Dear Sir, I, F. F. Musharrif of Karachi do hereby confirm that I have this day deposited with the National Bank of Pakistan, Local Principal Officer, Karachi, the title deed relating to my property and detailed in the Schedule hereunder written, with the inten tion of creating an equitable mortgage on the properties, including all my right, title and interest comprising in or arising from the said title deeds for securing to the said Bank the repayment on demand of the amount from time to time advanced by the said bank to the firm of Messrs Fahim & Co. Karachi, of which I am one of the partners and attorney for the other partners with interest at the rate of six per cent. per annum and payable to the said bank on the basis of a promissory note Rs. 2,50,000 (rupees two lakhs fifty thousand only) executed by me in their favour on the 17th June 1952. Yours faithfully, (Sd.) F. F. Musharrif Schedule of title deeds. A bare reading of this letter clearly indicates that it was written by way of confirmation of the act that had already been done. In other words the equitable mortgage had been created earlier to create an equitable mortgage and Exh. 54 was written to confirm that fact. This letter, in my opinion, is therefore clearly a memorandum of deposit of title deeds and does not itself purport to be a mortgage deed. The first case on which reliance is placed for this point is Official Assignee v. Sind Provincial Co‑operative Bank Ltd (A I R 1943 Sind 36). The relevant portion of the judgment reads as under: "There seems then no need to frown on an equitable mortgage or to strain the law against it or to regard it as a practice which in the interests of the community should be discouraged and discontinued. On the other hand, if the parties do indeed put their bargain or their contract into a written document, if out of abundant caution they overreach themselves as in I L R 1939 Kar. 287 (P C), then it is the written document which prevails. There will not be, as the learned Advocate for the respondent argues, two separate and distinct and valid mortgages, the equitable mortgage in the forenoon and the legal mortgage in the afternoon. The transaction is one, and in competition between an equitable and legal mortgage, the legal mortgage will prevail and will require registration. But we agree with the learned Judge that in this case Exh. 24 did not contain the bargain between the parties, but merely evidence it. Necessarily, the "memorandum must refer to the equitable mortgage, if it is to evidence it; it may mention the loan, the period of the loan, the rate of interest and describe the property. If an equitable mortgage is proper and lawful thing, there is nothing wrong that evidence, even written evidence of it, should be preserved. If the memorandum becomes so complete as to contain in itself the bargain as such then the written contract supersedes the oral contract, and the parties if they desire merely to evidence that equitable mortgage overreach themselves but they must take risk. Speaking for myself, I think the case before me is a case almost on the verge of what is permitted if the memorandum is to serve only its limited purpose." The memorandum in the case referred to above reads as under:‑-- " Karachi, 7th August 1937. To The Sind Provincial Co‑operative Bank Ltd., Karachi. Dear Sir, We confirm having already deposited with you the title deeds of our following property in Karachi as per particulars given hereunder as security by way of mortgage for the sum of Rs. 11,500 (eleven thousand and five hundred) advanced to us by way of over‑draft and for which we have handed you a Demand Promissory note and all interest thereon and all costs and charges and sums that may be, incurred or spent by you. We undertake at all times, so long as any money remains due to you, to keep the mortgaged property insured against loss or damage by fire in the full value thereof and will duly and punctually pay all premiums and sums of money necessary for such purpose and will duly assign and hand over to you the policy or policies of Insurance and the receipts for every such payment. If default be made in keeping the property so incurred at any time, it shall be lawful for you to effect the insurance and to treat all moneys so, spent as moneys advanced to us. We declare that the property mortgaged with you is free from all encumbrances or liens of any sort whatever. Description of property and title deeds deposited. S. No. 47 Sheet M. M. 7, containing about 310 square yards, Machi Miani Quarter, Karachi (Old No. 9 Sheet C‑3). (1) Sanad dated 21st August 1928 issued by the City Deputy Collector, Karachi, in favour of Ghulam Hussain Varoo, Abdul Muhammad Jumo and Hussain Karim. (2) Extract from new property register. (3) Certified copy of partition deed dated 15th May 1929 between Abdul Muhammad Jumo and Ghulam Hussain Varoo and Hussain Karim. Yours faithfully, (1) Ghulam Hussain Varoo. (Sd). Ghulam Hussain Varoo: (2) Hussain Karim. (Sd). Hussain Karim." A perusal of the above memorandum will make it clear that it is more detailed than the one in the present case and yet a view has been taken that it is just a memorandum and not a mortgage deed.

19. The second case on this point is Rachpal v. Bhagwan das (AIR1950 SC 272). 'The relevant portion runs as under: "On account relating to the appellant's dealings being examined a large sum was found due to the respondents who demanded payment. The appellant thereupon brought and gave certain 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 and signed and delivered to the respondents. The memorandum was 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 following title deeds in Calcutta at your place of business at No. 7, Sambhu Mullick Lane, relating to our properties at Samastipur with intent to create an equit able 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 . . . . . . Held that the memorandum did not require registration."

20. The third case on the point is Sundarachariar v. Narayana Ayyar (A I R 1931 P C 36.). The relevant portion reads as under:‑ "A person in Madras gave a promissory note and on the same date gave a memorandum which contained a list of the title deeds with the introductory words: "As agreed upon in person, I have delivered to you the under mentioned documents as security: Held: that the memorandum was not other than a written record of the particulars of deeds the subject of an agreement constituted in fact by the act of deposit and the payment of the money, and that it neither purported nor operated to create or declare any right, title or interest in the property included in the deeds, with the result that it did not require registration. Even if it was a condition of the advance that the memorandum was to be given, the fact that the memorandum was prepared, signed and handed over to the mortgagee before the advance of the balance of the money to be secured by the deposit could not alter the nature and meaning of the document. It was and remained a list of the documents deposited and nothing more. It did not embody the terms and of the agreement between the parties and did not require registration."

21. The admitted position on the record is that the title deeds lying with Habib Bank had been taken from there and kept in deposit by the plaintiffs. This letter Exh. 54, is consequen tly a confirmation of the deposit of those title deeds. The deposit of title deeds did not accompany this letter.

22. In view of that has been said in cases cited above, there can be no escape from the conclusion that Exh. 54 is merely a memorandum and therefore does not require registration. The very fact that this memorandum was written on a letterhead and not on a stamped paper is also a circumstance in support of the view I am holding. In view of the above discussions this issue is decided against the defendants. Full Bench decision of this Court reported to in National Bank of Pak. v. Fasihuddin and others (P L D 1964 Kar. 92) also supports me on the conclusions drawn by me.

23. The decision on issue No. 10 will go along with the decision on issue No.

9. There can be no two opinions about the question that 'the plaintiffs are a mortgagee in good faith for good consideration. The plaintiffs had admittedly advanced moneys and that the deposit of title deeds with them had been made with a view to create equitable mortgage for a consi deration.

24. So far as issue No. 11 is concerned, the learned counsel r for the defendants have not been able to challenge any of the items of moneys drawn by defendant No. 2 as shown in statement of account filed with the plaint. In fact it has been admitted that after June 17, 1952 the defendants withdrew from the plaintiffs Rs. 140‑10‑0, Rs. 1,325‑9‑0, Rs. 2,000 and Rs. 5,

000. It has also been admitted by defendant No. 2 that the amount due from him on 17th June 1952 was Rs. 1,97,638‑10‑

11. The only dispute between the parties is on the rate of interest. The rate of interest as stipulated to be charged from the defendants was 1% above the bank rate i.e. 4 % up to 17th June 1952. The interest agreed upon to be paid after 17th June 1952 is 6 %. The contention raised is that there is no warrant for changing the rate of interest from 17th June 1952. The loan when previously given was at the rate of 4 %. It continued to be at that rate despite the fact that the pledge of the goods vanished on 17th June 1952 and the loan became an unsecured one. When the advances already made and a further advance of Rs. 73,000 and odd made to defendant 2 came to be secured on account of deposit of title deeds there is no justification whatever for increasing the rate of interest. The learned counsel for the plaintiffs has urged that the rate of interest being agreed rate of interest between the parties it cannot be changed unless it be shown that it is unconscionable or exorbitant. I cannot quite agree with the learned counsel for the plaintiffs. As I have already stated, the change in the rate of interest is unwarranted by any circumstance on the record and I am, therefore, inclined to take a view that the increase, in the rate of interest in the circumstances of this case would appear to be exorbitant. I therefore while allowing the claims of the plaintiffs for their principal reduce the rate of interest from 6 % to 4 %.

25. The learned counsel for the defendants have also argued the points which were not covered by the issues. Since they were not covered by the issues they did not require any mention. But since they have been argued, I would make a reference to them and also give my finding that there is no substance in them.

26. The first point raised is that the statement of account filed with the plaint was not in accordance with the Banker's Book Evidence Act of 1891. It is urged that the certified copy does not indicate that it was signed by principal accountant. I have looked at the statement of accounts. It shows that it was signed by an accountant. The burden lay on the defendant to show that the accountant who had signed this statement of accounts was not the principal accountant of the bank. I, therefore repelling the contention of the learned counsel for the defendants, am of the view that the certified copy of the statement of account is in accordance with the provisions of law.

27. The second point put across is that the suit is founded upon the confirmation slip which had been signed by defendant No. 2 from time to time and that they required to be stamped. It is argued that the stamps appearing on these confirmation slips have been put subsequently and as such would not meet with the requirement of law. I am afraid I cannot look into this issue at the stage. Although the defendants knew that the suit was brought within time on the basis of these confirmation slips yet they did not so much as even raise a contention in their written statements that the suit was time‑barred. At no point of time has any defendant stated that the confirmation slips of which a mention was made in the plaint were stamped subsequent to the time when they were signed by defendant No.

2. In view of there being no dispute raised by the defendants on this point the plaintiffs could not foresee what the case of the defendants would ultimately be in the arguments so that they should have examined evidence to establish that the stamps appearing on the confirmation slips were put on them at the time when they were signed by the defendant No.

2. The learned counsel for the defendants concede that no issue on this aspect of the case has been raised. He also concedes that the point in question was not directly or indirectly raised by any of the defendants at any time. I, therefore, see no substance in this point of the counsel for the defendants also.

28. In view of what I have stated above, I decree the suit of the plaintiffs with costs. The decree shall be given to the plaintiffs against defendant No. 2 alone for the sum which will be calculated in the light of the observations made by me pertaining to the rate of interest. A declaration is also given that the property specified in paragraph 8 of the plaint is charged for the payment of the plaintiff's claim. K.B.A. Suit decreed.