1930 (5) TMI 14 - HC - Indian Laws

Privy Council clarifies marshalling clause: appeal allowed, costs awarded.

Sunitibala Debi Versus Manindra Chandra Boy Chaudhury and Anr.

Sunitibala Debi Versus Manindra Chandra Boy Chaudhury and Anr. - AIR 1930 PC 217 Issues Involved:1. Validity and enforceability of the mortgage deed.2. Liability for compound interest.3. Construction of the marshalling clause in the mortgage deed.4. Entitlement to costs.Detailed Analysis:1. Validity and Enforceability of the Mortgage Deed:The litigation revolves around the property of Sarat Chandra Roy and involves a dispute over two wills. The appellant claimed succession under an earlier will dated September 21, 1892, while the respondents, successors-in-interest of the deceased's widows, propounded a later will. The District Judge rejected the later will as a forgery, and the High Court of Judicature at Port William became involved. The litigation led to a compromise, resulting in the current suit, which has been ongoing since March 22, 1909. The suit, as it stands, is for the recovery of the entire mortgage money by the assignees of the mortgagees, seeking the sale of the entire mortgaged properties.2. Liability for Compound Interest:The mortgage deed executed on March 5, 1907, included a covenant for payment of principal money with interest at 6% per annum. However, the appellant's solicitor struck out provisions for compound interest in two instances but left it in one. The High Court ruled that Schedule C properties were liable for compound interest, reasoning that if the principal and interest chargeable on properties in Schedules A and B were not fully realized, properties in Schedule C could be sold to make up the deficiency. However, this contention was disputed by the appellant, who argued that it was a mistake or oversight by her solicitor.3. Construction of the Marshalling Clause in the Mortgage Deed:The marshalling clause in the mortgage deed stated that Aga Muhammad's rights would not be prejudiced, except that his right would be subject to the mortgagees' rights. The clause specified that properties in Schedules A and B should be sold first to cover the mortgagees' claim before selling properties in Schedule C. The High Court's interpretation was that Schedule C properties were liable for compound interest if there was a deficiency from the sale of properties in Schedules A and B. However, the Privy Council found this interpretation untenable. The deficiency referred to in the clause should be the difference between the amount realized from properties in Schedules A and B and the mortgagees' claim for principal, simple interest, and costs, not compound interest.4. Entitlement to Costs:The Privy Council criticized the extravagance of the litigation and noted that unnecessary expenditure in litigation brings the administration of the law into disrepute. The Privy Council concluded that the High Court's decree should be discharged, and the decree of the learned Subordinate Judge should be restored. The respondents were ordered to pay the appellant's costs in the High Court and of the appeal.Conclusion:The Privy Council allowed the appeal, discharging the High Court's decree and restoring the decree of the learned Subordinate Judge. The respondents were ordered to pay the appellant's costs in the High Court and of the appeal. The construction of the marshalling clause was clarified to mean that properties in Schedule C could only be sold for a deficiency in the amount recoverable from properties in Schedules A and B, which did not include compound interest.