1990 PLP 1566 (CLC)

We acknowledge having further agreed in consideration of the Bank's granting loan to us to make out at our own cost a Ragistered English or any other kind of Mortgage of the property, with power of sale without intervention of Court in Bank's favour as and when desired by the Bank "

10. Mr. Mansoorul Arfin, learned counsel for the defendants has argued that Exibits 24/1 and 24/2 are not simply recitals of any past transactions but they constitute contracts of mortgage in praesenti between the parties and since the documents are unregistered, the same are inadmissible in evidence for, the reason of failing to meet the requirements of section 17 of the Registration Act, 1908 or section 59 of the Transfer of Property Act. Mr. Inamul Haq, learned counsel for the plaintiffs, on the other hand, has argued that the documents in question by themselves do not constitute any mortgage and the equitable mortgage is therefore, valid.

11. Both the learned counsel have relied upon a number of cases, to which I now propose to refer. In Mst. Begun v. Mst. Fatimabhai (P L D 1961 (W.P.) Karachi 537) the relevant part of the document in question which ran into five pages read as follows; "Now these presents witnesseth that in consideration of the sum of Rs.60,000 (Rupees Sixty thousand) lent and advanced by the mortgagee to the mortgagor as aforesaid (the receipt whereof is hereby also acknowledged) the mortgagor has this day deposited with the mortgagor in Karachi the Documents of Title specified in Part 11 of the Schedule hereunder written relating to the said premises more particularly described in the Part I of the Schedule hereunder with the intent to create a security thereon, and as a first charge for the due repayment of the said sum of Rs. 60.000 with interest thereon at the rate of 9 per cent per annum payable monthly with quarterly rest in account, and of all costs between Advocate and client of and incidental to these present and of suit or proceedings (if any), to enforce payment of the said loan." Justice A.S. Faruqi, who delivered the judgment in the above case, concluded that the document was itself a mortgage and thus it came within the mischief of Section 17 of the Registration Act and the same not having been registered was inadmissible in evidence. Reference in the judgment was made by him to the earlier pronouncements of the Privy Council on the point reported as M. Subramanian and another v. M. L.R.M.Lutchman and others (A I R 1923 P C 50), Sundarachariar and others v. Narayana Aiyyar and others (A I R 1931 PC 36) and Hari Shankar Paul and another v. Kedar Nath Saha and others (A I R 1939 P C 167).

12. In the case of M. Subramanian, the document in question was to the following effect; "We hand you herewith title deeds, etc .... This please hold as security, etc ....please also hold this as further security." It was held by their Lordships as follows:‑ "If this memorandum was of such a nature that it could be treated as the contract for the mortgage and what the parties considered it to be the only repository and appropriate evidence of their agreement, it would be the instrument by which the equitable mortgage was created, and would conic: within section 17 of the Registration Act." Reference was made by their lordships in the above judgment to Kedarnath Dutt v. Shamlall Khettry (11 BLR 405) which was another leading case on the point and the following passage was quoted therefrom with approval: "The rule with regard to writing is that oral proof cannot be substituted for the written evidence of any contract which the parties have put into writing And the reason is that the writing is tacitly considered by the parties themselves as the only repository and the appropriate evidence of the agreement:' 13. 1n Sundarachariar and others v. Narayana Aiyyar the memorandum of deposit of title deeds read as follows: "Written to E.N.A. Samoo Bathar by Krishana Swami Ayyar, of S.V. Ramasami Ayyar and Brothers. As agreed upon in person I have delivered to you the under-mentioned documents as security." It was held by their Lordships that the document did not require registration and the reasons for the same were stated as follows: "It records particulars of documents which, it states, have been delivered as security in pursuance of an agreement reached in person. It does not state what were the terms of the agreement or indicate the nature of the matter for which the deeds were deposited as security."

14. However, in Sir Mari Shankar Paul and another v. Kedar Nath Saha (A I R 1939 P C 167) the memorandum in question was found to be an integral part of the transaction and itself an operative instrument and not merely evidential. Hence it was held that the document required registration. To quote their Lordships: " It states that it is hereby agreed and declared between and by the parties that in consideration of the sums advanced the title deeds of the property shall be held as security on the said property and refers to any proceedings which may be had for the protection of this security or for procuring payment of the money hereby secured".

15. A similar question once again came up for examination before Noorul Arfin, J. another learned Judge of this Court, in Messrs Eagle Star Insurance Co. Ltd. and others v. Messrs Usman Sons Ltd. and others (P L D 1969 Kar. 123). In this case several writings were executed by the defendants, undertaking that the properties purporting to be mortgaged by deposit of title deeds" shall not be encumbered or alienated by the mortgagors before repayment of the aforesaid loan by Messrs Usman Sons Ltd., to the Eagle Star Insurance Co. Ltd. It was further stipulated that "The said property shall be answerable for all the claims of the sale of Eagle Star Insurance Co. Ltd. in respect of the above‑said two loans". The learned Judge, after referring to various cases on the point finally concluded that the documents in question constituted contracts of mortgage and were not mere records of completed transactions and consequently required registration.

16. The question was also examined by the Supreme Court in United Bank of India Ltd. v. Azirannessa Bewa alias Azizannessa Bewa (P L D 1965 SC 274). The material words in the memorandum of title deeds in the case were as follows: "This is to put on record that this day I deposited with you at your head office at Calcutta the documents specified in the Schedule thereto with intent to create an equitable mortgage upon all my estate and interest in the property to which such document relates for the purpose of securing the payment to the Bank on demand of all moneys now owing or which may hereafter be owing from me " The learned Judges of the High Court, who heard the case earlier, held that the document in question was not a mere memorandum of the previous mortgage, but it actually contained a bargain between the parties. However, the Supreme Court, while applying the same test as was laid down by the Privy Council in the case of Sundarachariar v. Narayana Ayyar held that the document did not create any relationship in praesenti. It was observed: "In our view, the letters here in question, fall within the principle enunciated in the case of Sundarachariar v. Narayana Ayyar, which we observe is not mentioned in the judgment of the High Court. There are not words in these petitions which purport to create any relationship in praesenti. The mention of the deposit is in the past tense, i.e `I deposited', There are no words used to show that in praesenti, the security was being ‑ created, but it is said 'I deposited. The documents with intent to create an equitable mortgage' and in the light of the observations in the judgment of the Privy Council last cited, the possession of such an intent at the time of deposit, being in the past is capable of being proved by production of the document in evidence. It is indeed probable that the language employed in these `letters of deposit' is derived from the declaration of law by the Judicial Committee in the case of Sundarachariar, which (we say so with respect) is entirely correct. We are accordingly unable to sustain the finding of the learned Judges on the point."

17. In another case reported as Muhammad Farooq Khan v. Sulaiman A.G. Panjwani (P L D 1977 Kar. 88), the document purporting to create: an equitable mortgage envisaged that the documents of title had been deposited by way of equitable mortgage to secure overdraft etc". It was held that the document did not create any rights in praesenti. It was further held that the words "to secure", appearing in the memorandum, had failed to express an intent to create security in the futere.

18. Cases have also been cited by the learned counsel from the Indian jurisdiction, the first being the case of United Bank of India Ltd. v. Messrs. Lekharam Sonaram & Co. (A 1 R 1965 SC 1591). In this case one of the defendants wrote a letter to the Manager of the plaintiff Bank, stating that " this is to place on record that I have this clay deposited with you at your Head Office the undernoted documents of title relating to my properties with intent to create an equitable mortgage upon all my rights, title and interest in the said properties to secure due payments on demand of all money now owing or which shall at any time hereafter be owing from me or from whether on balance of account or by discount or otherwise in respect in any manner whatsoever and including interest with monthly rests commissions and other banking charges and any law costs incurred in connection with the account. I do hereby put on record that the properties mentioned below are free from all encumbrances". It was held by the Supreme Court of India that such document was not intended to be an integral part of the transaction and did not, by itself, operate to create an interest in the immovable property. It was observed: "Applying the principle to the present case we consider that the letter Ex. 7 (a) was not meant to be an integral part of the transaction between the parties. The letter does not mention what was the principle amount borrowed or to be borrowed. Neither does it refer to rate of interest for the loan. It is important to notice that the letter does not mention details of title deeds which are to be deposited with the plaintiff‑Bank " Consequently, it was held that the document did not require registration.

19. In another case reported in A.I.R. 1968 Delhi 244, the following guidelines were laid down by the Court:‑‑‑ "A mortgage by deposit of title deeds does not require any writing but it is usual for the mortgage to be accompanied by a memorandum in writing. In order to decide as to whether the writing requires registration the Court has to see whether the writing itself constitutes the bargain or contract between the parties, or whether it is a record of an already completed transaction. In the former case the writing would require registration, but in the latter case it would not. It would also depend upon the intention of the parties. If the parties intend to reduce their bargain regarding the mortgage by deposit of title deeds in the form of a document and want that document to be the only repository and appropriate evidence of their contract of equitable mortgage, the document would require registration. If on the other hand the Court comes to the conclusion on construction of the document and consideration of the surrounding circumstances that the parties did not intend to reduce the bargain into writing, the contract to create the mortgage would arise by implication of law by the deposit of title deeds with the requisite intention and a letter or a memorandum sent about the deposit of title deeds would not require registration."

20. Reference has also been made by the counsel to another case, decided by the High Court of Calcutta‑ and reported in LVII Indian Cases

686. In this case, the plaintiff held a mortgage of certain properties under two mortgage‑deeds, executed in his favour by the defendant, who also delivered to him the title‑deeds. Subsequently the defendant took a loan on the security of title deeds executing a promissory note for the amount and on the same day he wrote a letter to the plaintiff in the following terms: "for repayment of the sum of Rs. 1,500 with interest I have borrowed from you on a pro‑note of date, I thereby put on record that the title deeds of my premises already deposited with you shall be held as collateral security." Upon receipt of this letter the plaintiff advanced the money. A question arose before the Court, whether the transaction constituted a valid equitable mortgage. It was held that as the title deeds were deposited by the letter and the money was advanced after the letter was written, and since no mortgage was created before the letter was written, the letter being unregistered was inadmissible in evidence and there was, therefore, nothing to show that an equitable mortgage had been constituted.

21. An examination of the two documents in question (Exs.24/1 and 24/2) in the light of the principle enunciated in the above cases shows that although they begin with the words " We do hereby acknowledge", but such words are followed by the words "We have already deposited with the Australasia Bank Limited documents of title" These words are clearly indicative of a past transaction between the parties. No doubt, the documents further stipulate in the same breath that. We hereby declare that we shall not hereinafter as already agreed put this property to any further charge or encumbrance without the prior consent of the Rank in writing. And again in the following paragraph they stipulate that: We acknowledge having further agreed in consideration of the Bank's loan to us to make out at our own cost a Registered English or any others kind of Mortgage of the property, with power of sale without intervention of Court in Bank's favour as and when desired by the Bank." But notwithstanding such declaration or undertaking embodied in. the two documents, the same cannot be construed as integral to the main transaction by which the mortgage by deposit of title deeds was created. In order that a document be hit by the mischief of section 17 of the Registration Act, a clear intention must be spelled out therefrom that the parties to the transaction intended it to be used as the only repository of their agreement. Such does not appears to be the case in the present case. As it appears, the two documents only purported to record a past transaction which stood concluded when tile title deeds were deposited by the defendants with the plaintiffs. Consequently, even 11' something more was agreed upon by the defendants at the time of the execution of the two memoranda, the same would not render the transaction illegal unless the undertaking in writing is construed as an integral part of the, transaction. The parts of the memoranda upon which the defendants have rested their case and which have been reproduced above, neither by themselves create any mortgage nor they can be regarded as integral to the oral agreement of mortgage already entered into by the parties. I am, therefore, of tile view that documents in question do not create a mortgage and, therefore, they are admissible in evidence. Issue No.3 , is, therefore, answered accordingly.

22. Issue No.4. The next question is whether the defendants by their letters dated 29‑5‑1975 and 13‑7‑1976 admitted the claim of the plaintiffs. Mr. Inamul Haq, learned counsel for the plaintiffs, has very candidly conceded that the two letters cannot be construed as admissions. The issue is, therefore, answered accordingly.

23. Issue No.5. The next argument of Mr. Mansoorul Arfin is that the suit of the plaintiff is time‑barred. It is pertinent to note that the suit was originally filed in the Court of Senior Civil Judge Hyderabad on 20‑7‑1977 whereas the loan was initially taken by the defendants in 1972. It may be pointed out that as far as the case of the plaintiff relating to the enforcement of the mortgage is concerned, there is no controversy about the same. However, the objection relates to the rest of the plaintiff's claim. In this respect, the learned counsel for the plaintiff has referred to three letters, written by the defendants to the plaintiff, dated 1‑6‑1974, 29‑5‑1975 and 13‑7‑1976, Exs: 44, 42/1 and 42/2 respectively, each one of which, according to him, constitutes an acknowledgement of liability as contemplated by section 19 of the Limitation Act. In this respect, the contention of Mr. Mansoorul Arfin is that except the letter (Ex:44) none of the other letters constitutes acknowledgement of liability by the defendants. However, the signature of the defendant's Managing partner, Chaudhry Mohammad Rafiq on Ex. 44 has been denied by him. It may be pointed out that although no handwriting expert has been examined by either party to bring the controversy to rest, but on comparison of the disputed signatures of Chaudhry Mohammad Rafiq with his admitted signatures on Exs. 23/1 and 23/2, reference to which has already been made above, I find that Ex.44 has been signed by the same person. Now all the lid three letters clearly constitute acknowledgement of liability by the defendants within the meaning of section 19 of the Limitation Act as they admit the debt, coupled with a promise to pay the same. Learned counsel for the plaintiff has also I referred to Ex.45 in this respect, which is a payment slip dated 19‑4‑1975, filed on behalf of the defendants showing the last payment made by the defendants into their account and which according to him, constitutes further acknowledge of liability by the defendants. However, in view of the above finding Issue No.5 is decided in favour of the plaintiff.

24. This brings us to issue No.

6. It may be pointed out that the power of attorney, which was given by one of the directors of Australasia Bank Ltd. to one of it's officers, namely, P.W. Syed Mehmood Ali, authorises filing of a suit by two such officers jointly. When the plaint was presented before this Court, the same had been signed by only Mr. Syed Mehmood Ali. However, another officer of the Bank who had also been separately authorised by another power of attorney, namely, Mr. Nawab Abdul Ali Khan was also permitted by this Court to sign the plaint and the record shows that the same was done by him on 24‑10‑1978 t he two powers of attorney produced in evidence show that the power of attorney favour of Mr. Syed Mehmood Ali was executed on 16‑12‑1964, whereas the same in favour of Mr. Nawab Abdul Ali Khan had been executed on 23‑8‑1976. Mr. Nawab Abdul Ali Khan produced certified copies of extracts from the minutes of a meeting of the Executive Board of the plaintiff Bank, (Exs. 56/1 and 56/2) showing that on 9‑6‑1974, the President as Chief Executive of the Bank had been authorised to execute and deliver powers of attorney to the employees of the plaintiff bank under his signature. By another Resolution, dated 27‑1‑1976, two senior executives of the plaintiff Bank were authorised to issue, sign and deliver powers of attorney in favour of the employees of the Bank at .the recommendation of the concerned department. A copy of another Resolution, dated 28‑2‑1965 (Ex. 56/3) further shows that the Board had authorised Mr. Mian Farooq Ahmed Shaikh and Mian Hidayat Ali Taib, the Chairman and Director respectively of the plaintiff Bank to execute powers of attorney in favour of Officers of the Bank. Consequently, the argument of Mr. Mansoorul Arfin is that there is no evidence to show that the issuance of the first power of attorney in favour of Mr. Syed Mehmood Ali had been authorised by any resolution of the Executive Board as no such document was produced by the plaintiff. Reliance in this respect has been placed by the learned counsel on the case of Messrs Muhammad Siddiq Muhammad Umar v. Australasia Bank Ltd. (P L D 1966 SC 684), wherein it was held that a person holding power of attorney on behalf of the Bank could only do so if he was duly authorised in that behalf and occupied one or the other of the positions mentioned in rule 1 of Order XXIX of the Civil Procedure Code. It was further held that for this purpose a reference to the articles of association of the company was necessary to see whether the director was competent to delegate such power. However, in view of the evidence produced in the case, it was held that the production of the resolution could be dispensed with by the Court.

25. The question raised by the learned counsel requires examination from two different angles. Firstly in order to meet the requirements of rule 1 of Order XXIX, the plaint in the suit must be signed and verified on behalf of the corporation either by it's secretary or by any director or other principal officer of the corporation who is able to depose to the facts of the case. Although it is not the case of the plaintiff that Mr. Syed Mehmood Ali or Mr. Nawab Abdul Ali Khan did not qualify under the above rule to sign the plaint, but the learned counsel has emphasised that the requirements of Order III, rule 2 are also imperative and must have been complied with. This rule provides for the recognized agents of parties by whom appearances, applications or acts may be made or done in any Court which are required or authorised by law to be made or done. Such persons according to‑Rule 2 (a) are: "(a) persons holding powers of attorney, authorising them to :.make and do such appearances, applications and acts on, behalf of such parties;

26. No doubt in order to show that Mr. Syed Mehmood Ali was a duly constituted attorney, evidence regarding such authority as referred to in Rule 2 (a) would become necessary but the power of attorney (Ex.20) itself shows that the aforesaid Officer had been authorised by virtue of the Resolution of the Executive Board of Australasia Bank passed on 25‑9‑1964. Although a copy of such Resolution was not produced by the said Officer in evidence, but there is a clear reference to the Resolution in the power of attorney itself. It is not the case of the defendants that the directors of the Bank were not competent to delegate such power to the aforesaid Officer. However, since the plea has been raised by the defendants in their written‑statement, the onus to establish that the suit was not properly instituted is on them. The defendants have led no evidence in support of the plea. On other hand, the fact that the directors had given such power to Mr. Syed Mehmood Ali, is borne out from the power of attorney besides the evidence of Syed Mehmood Ali himself. The case relied upon by Mr. Mansoorul Arfin is not attracted as in that case the question which was required to be considered by the Supreme court mainly was whether the opportunity given to the plaintiff by subordinate Appellate Court to lead additional evidence was proper under the circumstances of that case. The procedure adopted by the Appellate Court was finally approved by the Supreme Court by holding that the question in regard to the authority of the attorney could be conclusively determined by production of the resolution of the Board of Directors. Therefore in my opinion, the concerned Officer had authority to institute the suit against the defendants and Issue No.6 is, therefore, answered accordingly.

27. In the result, the suit is decreed in favour of the plaintiff as prayed. A preliminary decree is passed in the first instance under Order XXXIV, rule

4. C.P.C. in Form V‑A in Appendix "D" to the first Schedule thereof for sale of the mortgaged properties of the defendants described in paras Nos. 7 and 8 of the plaint. A.A./A‑832/K Suit deercee