USUFRUCTUARY MORTGAGE IN MALABAR--WHETHER KANOM

By M. Velayudhan Nair, Advocate, Alathur

In two recent cases, Emunni Panikkar v. Krishna Panikkar (1958 Kerala Law Journal 805=1958 Kerala Law Times 756) and Janardhanan v. Kuppandi and another (1959 Kerala Law Journal 119 F.B.=1959 Kerala Law Times 118 F.B.) the Kerala High Court has taken the view that an usufructuary (possessory) mortgage is Kanom within the meaning of the Malabar Tenancy Act.

Section 3(14) of the Malabar Tenancy Act defines Kanom as follows:-

“Kanom means the transfer for consideration in money or in kind or in both by a landlord of an interest in specific immovable property to another [called Kanomdar] for the latter’s enjoyment, the incidents of which include

(a) Right in the transferee to hold the said property liable for the consideration paid by him or due to him which consideration is called ‘Kanartham’,

(b) The liability of the transferor to pay to the transferee interest on the Kanartham, and

(c) The payment of ‘Michavaram’ by the transferee”.

The suits in both the cases decided by the Kerala High Court were for redemption of usufructuary (possessory) mortgages. The mortgage in the first case Emunni Panikkar v. Krishna Panikkar was for a term of six years and under the provisions of the document, the mortgagee was to pay himself the interest on the mortgage debt and also pay the Government revenue from the income of the property and pay the balance of 106 paras of paddy as annual purappad to the mortgagor. The document contained also a provision for sale of the property for realization of the mortgage amount. His Lordship Mr.Justice Varadaraja Iyengar refers to the omission by the Amending Act 33 of 1951 of clauses 4 and 5 (relating to the Kanomdar’s right to enjoy the property for a period of 12 years and the liability to pay a renewal fee to the jenmi at the end of the period) from the definition of Kanom in the original Act 14 of 1930 and proceeding on the assumption that the mortgage in suit satisfies the definition of Kanom in Section 3(14) of the Amended Act, arrives at the conclusion that the transaction in the case amounts to a Kanom and the suit must therefore be stayed under Act I of 1957.

Clauses 4 and 5 to Section 3(14) which followed the present clauses (a), (b) and (c) and which were omitted by the Amending Act 1 of 1951 ran as follows: -

(4) The right of the transferee to enjoy the said property for twelve years or any ether period, and

(5) The liability of the transferee to pay a renewal fee to the transferor, if the transferee is permitted to enjoy the said property for a further period after the termination of the original period”.

Mr. Justice Varadaraja Iyengar seems to have assumed that as the definition of Kanom has been amended by Act 33 of 1951 by omitting clauses 4 and 5, leaving surviving only the three incidents mentioned in clauses (a),(b) and (c), a usufructuary mortgage would fall within the definition of Kanom in the Amended Act. This is evident from the Learned Judge’s observation in the Judgment that “it is not denied on respondent-plaintiff’s side that the definition in S. 3(14) is satisfied in this case”. 

The suit for redemption in the case before the Full Bench Janardhanan v. Kuppandi and another was decreed by the Munsif’s Court. In appeal the Subordinate Judge found that the Karipanayam sought to be redeemed was in substance only a renewal of a prior Kanon of the year 1906 and he held that the mortgage document Ex. B.1) represents Kanom demise and the suit was consequently dismissed. In Second Appeal, the learned Judges of the Pull Bench (Koshi, C.J., M.S. Menon and Varadaraja Ayyangar, JJ.) agreed with the conclusion reached by the Subordinate Judge that the mortgage document Ex. B.l represents Kanom demise and confirmed the decree and judgment of the lower appellate Court. The mortgage document in this Full Bench case was styled as a ‘Karipanayam’ & there was provision in the deed to pay purappad to the mortgagor at the rate of 110 paras of paddy a year by the mortgagee. The learned Judges seem to think that the mortgage document in that case (Ex. B.l) spells Kanom, but they do not indicate the reasons that induced them to take that view, notwithstanding that the words ‘Kanomdar’ and ‘Kanartham’ were not used in the document.

With great respect to the learned Judges, I submit, the view taken by them that an usufructuary mortgage will fall within the definition of Kanom in Section 3(14) of the Malabar Tenancy Act does not seem to be correct.

I respectfully submit that the omission of clauses 4 and 5 from the definition of Kanom in the original Act 14 of 1930 by the Amending Act of 1951 cannot have the effect of making this strange metamorphosis in the status of an usufructuary mortgage who was put in possession of the mortgaged properties only with the intention of securing the payment of money borrowed from him. It is difficult to see how the deleting of these two clauses from the definition, of Kanom in the original Act would have the effect of enlarging the rights of an usufructuary mortgagee & assimilating his status to that of a Kanom bar entitled to fixity of tenure and other benefits under the Tenancy Act-rights which he (the mortgagee) did not bargain for and which were totally absent from the minds of the parties at the time the mortgage transaction was entered into. The two decisions under notice have created a very anomalous situation-viz., there is no scope for an usufructuary (possessory) mortgage to operate as such in Malabar and other areas to which the Malabar Tenancy Act is applicable. All usufructuary mortgages hitherto executed and that may in future be executed will be treated as Kanom demises. This is the logical effect of the view expressed by the learned Judges in the two decided cases.

It is not suggested that because clauses 4 and 5 (relating to the 12 years period and to the liability to pay renewal fee, have been omitted from the definition of Kanom by the Amending Act, Kanom loses its essential character as a tenure in land and becomes an usufructuary mortgage. Notwithstanding the omission of these two clauses from the definition of Kanom by the Amending Act, Kanom retains its essential characteristics nad incidents, excepting the liability for the Kanarito pay renewal fee at the end of the 12 years period. A Kanom bar is entitled to fixity of tenure as provided in Section 21: he is not liable to be evicted before the expiry of the 12 years period and he is not liable to be evicted excepting at intervals of 12 years. Paradoxical as it may seem, although clause 4 relating to the 12 years period is taken away from the definition of Kanom by the Amending Act, the Kanomdar’s right to enjoy the property for a period of 12 years as an incident of the tenure has not been abrogated by the statute. That incident subsists. This is evident from the fact that the landlord’s right to evict for own cultivation, for construction of buildings, for residential purposes or for the extension of a temple, mosque or church as provided in clauses 4, 5 and 6 of Section 25 of the Amended Act can be exercised only after the expiry of the period of the Kanom, and also from the last proviso to Section 25 which was introduced by the Amending Act 33 of 1951. The said proviso reads as follows:-

“Provided also that no suit for eviction on one ground specified in clause 4 or clause 5 shall be instituted, except,

(a) In cases where the period of the lease has expired before the commencement of the, Malabar Tenancy (Amendment) Act 1951, within one year from the date of such commencement and in every twelfth year thereafter,

(b) In other cases within one year from the expiry of the period of the lease and in every twelfth year thereafter.”

As Mr. Justice Varadaraja Iyengar rightly observes in the decision in Emunni Panikkar v. Krishna Panikkar, no particular period need now be fixed in a Kanom demise, for no Kanom tenant can be evicted excepting at intervals of twelve years. As the Kanomdar’s right to enjoy the property for a period of 12 years and his non-liability for eviction excepting at intervals of 12 years are recognized and specifically provided for in S. 25 of the Act, clause 4 relating to the 12 years period in S.3(14) was probably considered otiose and this probably is the reason for deleting it from the definition of Kanom by the Amending Act.

Renewal and renewal fee were abolished by the Amending Act of 1951 and consistently with the repeal of the provisions contained in Act 14 of 1930 relating to renewal and renewal fee, clause 5 relating to renewal fee was deleted from the definition of Kanom by the Amending Act. It would have been absurd to retain that clause in the Act after the repeal of the provisions regarding renewal and renewal fee contained in the original Act. The abolition of renewal fee relieves the Kanomdar from a liability which the Legislature thought was unreasonable and oppressive. Its only effect is that from the date of the Amended Act, the Kanomdar has not to pay renewal fee, and non-payment of renewal fee will not avail as a ground for eviction. In other words, it only enlarges the right of the Kanomdar by enabling him to continue in possession even after the expiry of the term without paying renewal fee. It is difficult to see how, in the circumstances, the omission of clause 5 from the definition of Kanom would enlarge the rights of an usufructuary mortgagee and elevate him to the position of a Kanomdar.

If, on account of the omission of clauses 4 and 5 from the definition of Kanom by the Amending Act, Kanom does not become an usufructuary mortgage and notwithstanding the omission of those two clauses from the definition, Kanom retains its essential characteristics and incidents, excepting the liability for the Kanomdar to pay renewal fee the omission of which, as I have pointed out, only enlarges the rights of the Kanomdar, it is difficult to see how the terms and incidents of an usufructuary (possessory) mortgage governed by the Transfer of Property Act would satisfy the definition of Kanom in Section 3(14) of the Malabar Tenancy Act.

Usufructuary mortgage is defined in the Transfer of Property Act in these words:-

“Where the mortgagor delivers possession or expressly or by implication binds himself to deliver possession of the mortgaged property to the mortgagee and authorize, him to retain such possession until payment of the mortgage money and to receive the rents and profits accruing from the property or any part of such rents and profits and to appropriate the same in lieu of interest or in payment of the mortgage money or partly in lieu of interest or partly in payment of the mortgage money, the transaction is called an usufructuary mortgage and the mortgagee an usufructuary mortgagee”. (Section 58 (d).

The Transfer of Property Act specifies three classes of usufructuary mortgages, first, where, the rents and profits may be appropriated in lieu of interest; second, where they may be appropriated in lieu of principal; third, where they may be appropriated in lieu of principal and interest; the right to retain possession until the debt is paid being of the essence of an usufructuary mortgage as defined in the Act.

“An usufructuary mortgage,” remarks Dr. Rash Behari Ghose in his Tagore Law Lectures, “is a very common form of security in this country.” An usufructuary mortgage is executed as security for the payment of a debt and the right to retain possession created by the document is only accessory to the right to recover the mortgage debt. Mortgage is only a transfer of an interest in immovable property as security for repayment of a debt, while Kanom is a tenure inland. The difference in the purpose for which or the intention with which the two transactions--usufructuary mortgage and kanom-are entered into is clear from the wording in the definition of the terms mortgage, usufructuary mortgage and Kanom and must be kept in mind in order to appreciate the essential distinction between usufructuary mortgage and kanom. The distinction is real and not fanciful, and the connotation of the two terms is well understood in Malabar. In the definition of mortgage, the emphasis is on the intention to create a security in favour of the creditor for the amount borrowed. In the definition of Kanom (just as in the definition of lease in S.105 of the Transfer of Property Act) the emphasis is on the right to enjoy the property which is transferred. The true test to ascertain whether a transaction is a lease or a mortgage has been laid down by the Supreme Court in the recent decision in Ramadan Puri v. Banbey Behari Saran (1959) (1)Madras Law Journal 53-Supreme Court Reports) Says His Lordship Mr. Justice Subha Rao:-

“The only guiding rule that can be extracted from the cases on the subject (whether the transaction is a lease or a mortgage) in that Jthe intention of the parties must be looked into and “Once you get a debt with the security of land for its redemption (repayment), then the arrangement is a mortgage by whatever name it is called” (Ghose on Mortgage, 5th Edition, Vol.1 page 102).”

The suit in the case before the Supreme Court was to redeem a mortgage. Plaintiff claimed that the transaction was an usufructuary mortgage, but defendant contended it was a lease. His lordship after examining the terms of the document expresses the view that “under the document, there was a relationship of creditor and debtor between the parties and the property was given as security for payment of the amount advanced with interest “The gist of the document,” says His Lordship, ‘was not a letting of the premises, with a rent reserved, but a mortgage of the premises with a small portion of the income of it made payable to the plaintiff. There is therefore no scope for the argument in this case that the document is a lease and not a mortgage.’

The distinction between a mortgage and Kanom is well brought out by His Lordship Mr. Justice Krishna Pandalai in the case in Umerkutty v. Narayanan Chettiar (1929 A.I.R. Madras 777). That was a suit for specific performance of an agreement to grant a lease or a Kanom of a shop belonging to the defendant. The defendant contended that the bargain was for a Kanom, which is virtually a mortgage, and that the plaintiff lender cannot get specific performance of a contract to borrow. This contention was over-ruled by the learned Judge with these observations:-

“Where this contract substantially one of lending and borrowing as distinguishable from a contract for a well known tenure of land prevalent in a part of the Presidency and subject to well recognized incidents, the appellants’ argument would succeed. But if the contract was really not for lending money, but for a tenure in land, the fact that one of the incidents of the tenure is that the Kanom tenant advances money to the jenmi and that there are stipulations for the return of the sum or such portion of it as is left after setting off the arrears of rent at the termination of the tenure, is not, in my opinion, sufficient to make the contract one of borrowing To those conversant with the system of property holding in Malabar, including in that expression the whole of the Malayalam speaking country, it would come as a startling surprise to learn that a bargain for a Kanom was one for money and not for land.”

In the opinion of the learned Judge, a transaction of Kanom is one by which the Kanom tenant bargains for a substantial interest in the jenmi’s property for the purpose of occupation, cultivation and improvement.

In the following passage, His Lordship emphasizes the true nature of Kanom as tenure in land:-

‘In the States of Travancore and Cochin, the State has intervened by legislation to confer on the holders of this tenure rights of permanent occupancy which were imperiled by the development of the notions of mortgage and redemption and second mortgage introduced by modern courts interpreting western jurisprudence It is a matter of public knowledge that similar legislation is on foot in this Presidency (Reference is to the Malabar Tenancy Bill which became Act XIV of 1930) Lawyers are familiar with the early controversies as to whether Kanom is a lease or mortgage. The decisions on this topic which will be found set forth in Moore’s Malabar Law were that the Kanom is a lease or a combination of a lease and mortgage. The modern doctrine, the result partly of legal analysis and partly of consideration of convenience is that it is an anomalous mortgage. But to give it a legal label which really means that the so-called mortgage is subject to incidents in it by custom or by contract that do not fit in with any of the recognised forms of mortgage only emphasises that that description alone cannot be a guide in deciding whether the transaction is substantially one of borrowing and lending money or one by which the Kanom tenant bargains for a substantial interest in the jenmi’s property for the purpose of occupation, cultivation and improvement. I have no doubt that it is the latter”.

The true nature of Kanom, as distinguished from mortgage, which is a contract for borrowing or lending money is described as follows by His Lordship Mr.Justice Ramaswami in a case decided after the definition of Kanom in Act 14 of 1930 was amended by Act 33 of 1951 Mammikutty v. Cheria Chathu Kurup (1954(1) Madras Law Journal 439).

“Kanom is not really a contract for borrowing or lending money, but one for land. It is generally understood as an estate or tenure in land for the purpose of occupation, cultivation and improvement in which the Kanomdar has a substantial interest. The present definition steers clear of all difficulties by refraining from designating the transaction as a mortgage or as lease and by resting content with ti.e enumeration of its essential incidents”. 

That the legislature has treated Kanom, not as a mortgage, but as a tenure in land is clear from the definition of Kanom, and also from the definition of “tenant” and “landlord” in the Act (Section 3(27) and (19). ‘Tenant’ means any person who has paid or has agreed to pay rent or other consideration, for his being allowed by another, to enjoy the land of the latter and includes a Kanomdar. ‘Landlord’ means a person under whom a tenant holds and to whom he is liable to pay rent or michavaram and includes a jenmi.

The name by which the transaction is described in the document is of considerable significance in ascertaining the true intention of the parties and the real character of the transaction. In this context, one might usefully refer to the decision of His Lordship Mr. Justice Raghava Rao in the case in Raman Nambudiri v. Karthiayani Nangiar Amma (1951 (2) Madras Law Journal 527) - although the case was decided before the Amending Act of 1951 came into force. The dispute in that case related to the construction of a panaya-Kychit dated 25th May 1923. Plaintiff sued for redemption on the footing that the document evidenced an usufructuary mortgage. Defendant contended that the transaction was in the nature of a Kanom. Holding that the transaction was not a Kanom, but was only a possessory mortgage and reversing the judgment of the Subordinate Judge, the learned Judge made the following observations which are very apposite:-

“The name Panaya Kychit is, as Subba Rao, J. has observed in C.R.P. No.1253 of 1948, a very well known word in Malabar and where that word is used, there is no reason to suppose that a mortgage is not what was intended. If really the parties intended a Kanom, there was no difficulty in the way of their using that word. That the parties in the present case have not used that word, but have used altogether a different word is a point of considerable significance in my opinion which the lower appellate Court has altogether missed. It is argued by Mr. Sundara Iyer that the name is not all that matters, but that the substance of the transaction must be looked into. That is true, but where the substance of the transaction is not susceptible of easy definition on the provisions of the document, the significance to be attached to the name still remains, as I think”.

To suppose therefore, that an usufructuary mortgage satisfies the definition of Kanom in S.3(14) of the Malabar Tenancy Act is to miss altogether the essential distinction between mortgage and Kanom. It is unfortunate that not only was the essential distinction between usufructuary mortgage and Kanom not emphasized before the learned Judges, but a tacit admission also seems to have been made before Mr. Justice Varadaraja Iyengar in the case of Emunni Panikkar v. Krishna Panikhar, by plaintiff’s learned Counsel, wrongly, as I think, that the definition in Section 3(14) was satisfied in that case.

The most remarkable feature of the recent history of Criminal Law is the rise of probation. This has revolutionized the very conception of penal policy. Probation may be defined as the suspension of punishment plus personal supervision. A probation officer has three tasks before him. These are investigation, report, and treatment. With these three stages probation is the most advanced application of social case work in the field of Criminal Justice.

Distrust and resentment against the man who has been in prison has always proved an obstacle to the work of welfare agencies and to the honest efforts of the former prisoners themselves. It is a critical moment in the prisoner’s life and if he finds himself an out-cast excluded from the workshop and the companionship of respectable people he will rapidly develop a grudge to the Society. Man cannot leave in self contained isolation. Rejected from decent Society he falls back to the community of those he has met in prison.

Life is the greatest inventor of human destinies. It is wrong to imagine the prisoner as always the habitual criminal with a steady record of dishonesty. Abnormal times with social upheavals and growing insecurity throw people into crime. The right personal intervention by correctional methods may save thousands of persons from becoming criminals and they can be converted into good citizens of the Nation.

A MURDER IN THE HIGH SEAS -- 'CIRCUMSTANTIAL EVIDENCE ALONE'

(V.A. Abdul Azeez, B.A B.L., Legal Assistant, Kerala Law Secretariat)

It was a fine Sunday afternoon. The year was 1947. S. S. Durban Castle was ready at the Cape Town Harbour for a long voyage. There were two hundred and sixty-three passengers. Beautiful Rounie Gibson, aged twenty-one, occupied a first class cabin. No. 126, on B. deck. Prom the very start of the voyage a deck steward by name James Camb had shown considerable interest in Miss Gibson. Durban Castle started sailing on 10th October bound for Southampton.

The first few days of the voyage were uneventful. Miss Gibson dined with two table companions on the evening of October 17th. She also particip­ated in the dancing which followed the meal. She was in good health and high spirits. At 12.30 A.M. she was seen talking with Camb. That was the last time she was seen alive.

The bell in her cabin rang twice during that night and it was the duty of the night watchman to answer such calls. As the night watchman pushed open the door he observed a man standing inside the cabin whom he recognized as James Camb. Then the door was shut in his face and a voice said it is ‘alright’.

With the incident still alive in his mind at 6’o clock next morning, the night watchman informed the stewardess in charge of the Cabin what had happened in Cabin No. 126 the previous night. She knocked on Miss. Gibson’s door, and had found that it was unlocked. The Cabin was unoccupied. She commenced a search of Miss Gibson, but failed to trace her. The news was shocking. The Stewardess informed the Captain and an official search of the Ship was made immediately. Enquiry of the passengers and crew yielded no results. The conclusion was that in some manner the passenger had been lost overboard. The ship was put back over her course for a search of the sea and an urgent radio message was flashed to all the ships in the vicinity to keep good look out.

All these attempts failed to trace the body and the vessel continued on her home-ward run.

James Camb was the first suspect. There had been trouble between this deck steward and lady passengers on several previous voyages. He was examined by the ship’s surgeon. This revealed very severe and recent scratches on his shoulders and wrists. Camb said they were self-inflicted while attempting to seek relief from itches. It was improbable. No sane man will inflict such severe scratches on one’s own body.

The ship arrived in Southampton on 24th October. Camb was interviewed by the Police. Inside Cabin No. 126 finger prints were found and were identified as those of James Camb.

At last after repeated questionings Camb made a statement which was taken down in writing and which he signed. The effect of that statement was that he had made an appointment at IIP. M. on the 17th to meet Miss Gibsonand he met her at 2 P. M. in her Cabin and with her consent hadsexual connection with her. While in the act, she had suddenly clutched at him and foamed at the mouth, and that he could not find that her heart was beating. Thinkingshe had fainted he tried artificial respiration on her. While doing this the night watchman knocked at the door and tried to open it. He shut the door saying that it was alright. Finding no sign of life he managed to lift her to the port-hole and pushed her into the sea. Without a body it was obviously impossible for the medical experts to say anything about the cause of death.

Camb was committed for trial at the Hamshire Assizes on 24th November, 1947. The prosecution explained that a crime committed on a British Ship wherever that ship might be, was within the jurisdiction of the British Courts. Witnesses were Called from South Africa. This case by its very unusual circumstances had aroused great interest.

The evidence of blood-stains on the bedding of Miss Gibson’s bunk was dealt with. These stains belonged to group ‘C whereas Camb’s group was ‘A’. It was clear that blood must have come from the injured portions of the body of the deceased. The conclusion was that the girl objected to whatever advances the prisoner was making, that she rang the bell for outside help, that she scratched the prisoner and he throttled her for self preservation.

The cross examination was prolonged and relentless, but Camb faced it boldly. He rigidly stuck to his story that Miss Gibson invited him for asexual intercourse. When the process was in progress she collapsed. He in panic threw her body into the sea. The defence relied mainly on establishing that Miss Gibson suffered from heart disease and so the story of the prisoner could be true.

A contraceptive was found in one of Miss Gibson’s suit cases. The defence counsel made much capital out of this finding. He declared that Miss Gibson could not be a virtuous woman to be in possession of such a thing. But the accused could not give a satisfactory explanation for the severe scratches found on his shoulders. The Judge devoted three hours to his summing up.Most of the props on which the defence relied went down. He declared ‘Camb’s failure to call in the doctor who was close handy or to seek aid from the night watchman who was actually knocking at the door are instances of callous brutality not easy to parallel in the annals of Crime’. At the time he threw the girl into the sea, the Liner was ninety miles off of the West Coast of Africa in a shark infested sea.

Camb was sentenced to death. But he was lucky. At that time theParliament was discussing the Criminal Justice Bill, containing a clause suspending the death penalty, for five years. James Camb was sentenced to penal servitude for life, pending the Criminal Justice Bill becoming law.

HYPOTHECATION OF MOVEABLES

(Philip K. Thayil B.A., M.L., Advocate Ernakulam)

Introduction

“Hypothecation” says Sir Rashbehary Ghose “is, no doubt, the most convenient and simplest mode of giving security.” The best type of security according to Salmond is that which combines the most efficient protection of the creditor with the least interference with the rights of the debtor. In this latter aspect the mortgage falls far short of the ideal. Yet in English law mortgage is the most important form of security. In Roman law and in the modern Continental systems based upon it, the place assumed by mortgages in the English system is taken by the lien (hypothec) in its various forms. The Roman mortgage (fiducia) even before the time of Justinian was displaced by the definitely superior simplicity and convenience of the hypothec, vide Buckland Mc Nair, Roman Law and Common Law (2nd) 314.f t. It is interesting to note that the modern continental law has followed not the law of mortgage but the law of hypothec which is the most convenient and simplest mode of giving security. The prominence of mortgage as the most important form of security is a peculiarity of English and Indian law. The complexity and difficulty of the English law of security is according to Salmond entirely due to the adoption of the system of mortgage as distinguished from hypothec. Although hypothecation is the most convenient and simplest form of security, there is no statutory provision for hypothecation of moveable’s in India.

It is to be regretted that hypothecation of moveable’s is a subject on which the Indian Contract Act and the Transfer of Property Act are wholly silent. Someday, we can trust, the Indian Legislature will have leisure to take the question in hand and give us an Act which will deserve a better fate than the Bills of Sale Acts of England. The purpose of this article is to deal with the history and certain incidents of hypothecation of moveable’s for which despite the fact that hypothecation is the most convenient and simplest form of security. There is no statutory provision in India.

Origin and History of hypothecation:-

The history of what the law has been is necessary to the knowledge of what the law is. The oldest type of security of the Romans was the Fiducia which consisted in the formal transfer by the debtor of the ownership of his property to the creditor. This transfer was however subject to the condition that the creditor should recovery the property on due payment of the debt. On non-payment of the debt at the appointed time, the debtor not only was liable to forfeit his property, however valuable, but he also placed himself completely at the mercy of his creditor who might sell or otherwise alienate the property to a stranger. In this transaction the debtor had no personal liability. Another drawback of the Fiducia was that certain kinds of property could not be transferred by anticipation or in jure cessio, the only modes by which Fiducia could be created in Roman law. Hence a new mode of giving security had to grow up. This was the Pignus in which unlike the Fiducia there was a transfer not of the ownership but simply of the possession of the thing by the debtor to his creditor. The creditor could neither sell the pledged goods for the purpose of realizing his dues nor become its owner if the debt was not repaid. He could only put a pressure on the will of pledgor who could not get back the property into his possession without fulfilling his engagement. Another draw back of the Pignus was that the debtor might find it inconvenient or practically impossible to part with possession of his property or the creditor might be reluctant to burden himself with the custody of the pledge. So the Roman lawyers had to find out a more suitable method of giving security and they found what they wanted ready to their hands in the Greek Hypothec. Thus Hypothec is of Greek parentage adopted by’ the Roman lawyers. In this form of pledge, the debtor did not part either with the possession or the ownership of the property but simply agreed to hold his property as security for the fulfillment of his engagement.

When the owners of large estates began to let out their lands for the purpose of cultivation they felt that they should have some security for their rent. The cultivator generally had only his farming stock as his property and they could not for obvious reasons be made over to the landlord in a Pignus nor transferred to him as in a Eiducia which was applicable only to certain kinds of property. A change in the law was therefore effected by the exercise of the Praetorian jurisdiction and Praetor Salvius allowed the validity of the pledge of his farming stock by the cultivator for the rent by a single agreement to that effect. Unlike the Pignus the tenant was not obliged to part with the possession of his property, but the landlord was invested with a right in ram which enabled him to vindicate his possessory right to the pledge not only against the tenant but also against strangers by the Interdictor Salvianum. This hypothec which was originally regarded merely as a deferred or suspended pledge appropriate in the case of contingent liabilities as rent due from a lessee soon became very popular owing t’b its extreme simplicity. The next step in the evolution was the extension of this form of security to every kind of engagement, the pledgee being allowed to enforce his right to the pledge against the world at large in the form of action, Quasi Serveanum. The last and greatest step was taken when the pledgee was invested with the right of sale. This idea was borrowed from the practice of the State to sell lands pledged to the public treasury.

What is hypothecation of moveable’s:-”A transaction intended to be a security over chattels in which there are no words of transfer and where the possession remains with the borrower will therefore amount to an equitable charge which is generally known as hypothecation”- vide Tannan Banking Law & Practice in India 5th Edn. P. 300. It may be remembered that hypothec is a form of giving security in which the debtor did not part with the possession or the ownership of the property. So hypothecation of moveable’s is giving security of moveable’s without giving possession of the moveable’s, (i. e.) a pledge without possession. Pledge is the bailment of goods as security for the payment of a debt or performance of a promise and hence delivery of possession of the moveable pledged is essential for it. “There can be no pledge in goods unless there is an actual delivery of the goods. A loan, however, may be secured by a hypothecation of goods. Such a transaction does not require delivery of goods for its validity nor can it be said to be prohibited by the Contract Act merely because the Act contains provisions for bailment of pledges and none for hypothecation of goods”, vide Pollock and Mulla, Indian Contract Act 1957 Ed: P. 600. Hypothecation recognized by Haripada V. Anathi Nath Dey. (1918) 22 C.W.N.758, 44 I.C. 211 Holden P.249. 

‘Hypothecation is defined by J. Milnes Holden (P.223), in his Securities for Banker’s Advances as a legal transaction whereby goods may be made available as security for a debt without transferring either the property or the possession to the lender. The term Hypothecation, the origin of which in English law is discussed by Professor Gutteridge, O.P. Cit P.75 is sometimes used to denote the creation of a charge by the customer over the documents and the goods representing them, vide A. G. Davis’ Law Relating to commercial Letter of Credit P. 169. Lord Chorley in his Law of Banking 3rd Edn P. 237 says as follows about hypothecation. “It is necessary, however, to notice here a type of security which is in effect an agreement to pledge, of which considerable use is now being made-When the customer is obtaining regular finance from his banker by way of acceptance by the latter of drafts drawn upon him by sellers of merchandise imported by the customer, it is usual for the customer, to make an agreement with the banker under which all property of his which may from time to time come into the hands of the banker, or alternatively specified property is, declared to be charged, for the repayment of the amount of such acceptances. This agreement takes the form of a letter to the banker signed by the customer, which is called a letter of lien or sometimes of hypothecation An owner remaining in possession cannot effectively pledge, though he may undertake to give up possession on demand. Such a promise to give possession as security is called a hypothecation “. Lord Chorley opines that hypothecation has never become a term of art in English law and that is used by business people with a somewhat loose connotation, for instance the memorandum accompanying a pledge of documents of title to goods, by which the pledger authorizes the pledgee to dispose of the goods in the event of his failing to discharge his obligation is commonly called a letter of hypothecation. Milne Holden also holds the same view.

Special Advantages of hypothecation; -

Here the borrower (pledge) can continue to possess the things hypothecated. He need not part with possession. His possession as owner is by hypothecation converted into that of a bailee from the pledgee, the lender. This form of security causes the least inconvenience to the borrower and the lender The borrower can with the previous consent of the lender (bank,) from time to time sell or dispose of the goods hypothecated or any part thereof provided the advance value of such goods is paid into the said account or goods of a similar nature to those mentioned in the schedule and of at least value are substituted for the goods so sold after the approval of the bank (lender) obtained in writing. The borrower can create charge even on, future goods, a charge on the goods to be brought into the go down. Borrower cannot pledge future goods as he has to give actual possession for pledge. The business of the merchant borrower is not hampered he delivery of possession of the goods. This form of security causes the least interference with the rights and business of the borrower merchant. The hypothecated goods continue to be the absolute property of the borrowers at the sole disposal of the borrowers. If a customer is in posses¬sion then he will normally be able to pass that possession to his banker. However, in some instances it is quite impossible for a banker to be given the actual or constructive possession of goods and it is in these cases that the possibility of hypothecating them must be considered. For example the goods may be temporarily in the possession of third parties; or it may be that the goods are in a part of the customer’s own warehouse which cannot be sealed off in such a way as to enable the banker to become a pledgee. The borrower creates charge even on the goods which have not come to his possession. Goods hypothecated are delivered by the borrowers to the buyers and the moneys, when realized are paid to the bank, usually after a period of a week or two. The borrowers usually pay up the bank’s dues in preference to all other liabilities because of the fear of criminal liability. The borrowers being generally merchants and being in possession of the hypothecated goods can sell them for the best price in the market to the buyers of borrower’s own choice. On the other hand if the lender bank is in possession and the banker is selling tie best price may not often be available.

Advantage to Banker- Realization of the goods is generally left to the customer, who for one thing is better acquainted than the banker with the particular market in which the goods are dealt in and who. moreover, does not wish to disclose to purchasers from him that his business is being financed by the bank. But, for the purpose of realization, the customer requires the documents of title. If the banker delivers them to him, then the banker would lose his charge and in the event of his customer’s insolvency supervening, would be in the position of an ordinary unsecured creditor. To overcome this difficulty the mercantile genius has evolved what is known as “letter of hypothecation”, “letter of lien” or “letter of trust” and “trust receipt”. The letter of trust evidences the agreement reached between the banker and his customer, buyer the agreement being, on the banker’s part, to hand the document of title to the customer, so that he may obtain delivery of the goods and thus be in a position to deliver them to sub-purchasers; and on the customer’s part, to hold the docu¬ments, the goods when received, and the proceeds thereof when sold, on behalf of the banker. The common form of letter of trust states that the customer agrees to act as trustee for the bank. But by the agreement evidenced by the letter of trust the customer does not become trustee in the commonly accepted meaning of that term as the banker does not divest himself thereby of the property which he has in the goods. The relationship as A. G. Davis says is partly bailment, partly agency and partly trust.

Bankers generally do not have the facility for storing merchandise, which an extensive use of this type of security would entail, while realization might be difficult. Apart from goods of great intrinsic value, such as jewellery, pledges of goods are not favored. When the customer is obtaining regular finance from his banker by way of acceptance by the latter of drafts drawn upon him by feeders of merchandise imported by the customer, it is usual for the customer to make an agreement with the banker under which all property of his which may from time to time come into the hands of the banker, or alternatively, specified property is declared to be charged for the repayment of the amount of such acceptances. This agreement takes the form of a letter of lien or letter of hypothecation.

The right of sale and recoupment is given to the banker. It arises on default. Notice of the intention to sell must be given to the debtor so that he may have a final opportunity to discharge his debt.

The good, according to the terms of hypothecation will be kept insured by the borrower. If the goods are subject to considerable price fluctuation the banker will naturally watch the market price very closely and require the customer to maintain an adequate margin. 

Very often bankers cannot keep under lock and key the produce pledged to them. This is all the more so when the produce is in the period of industrial process. Banks therefore have to accept such stocks as security by way of hypothecation only instead of the usual pledge if they desire to finance the business. Hypothecations occur mainly in the case of industrial processes such as rice hulling, flour milling, groundnut decorticating, oil milling, cotton ginning and pressing, sugarcane crushing, and coffee curing. During these processes pledge is impossible. In the case of limited companies the charge on goods hypothecated to the bank is registered with the Registrar of joint stock companies and this serves as sufficient notice to the public of the Bank’s interest in the goods.

The lender bank can keep his sign board displayed prominently on the premises where the hypothecated goods are stored. This sign board will serve as a notice to the public about the bank’s interest in the stocks. If the volume of the business warrants, a chowkidar with bank’s uniform and badge may be stationed at the premises. If any one of these precautions will make the hypothecated goods cease to be in the order and disposition of the borrower then the reputed ownership clause in the Insolvency Act will be repelled.

The borrowers can sell only with the previous consent of the bank in writing. Goods are delivered by the borrowers to the buyers and the moneys when realized, are paid to the bank. Borrowers take care to see at the time of the submission of periodical statements of stocks that the position of the account is in order. Though the business is risky, in actual practice the borrowers usually pay up the bank’s dues in perference to all other liabilities because of the fear of criminal liability. The banker is entitled by the terms of the hypothecation, to enter upon any godowns or premises wherein the hypothecated goods or any part thereof may for the time being be and to view, inspect and value the same and take inventories thereof or to take possession thereof. The hypothecation agreement gives the bank absolute authority to take possession of the goods under hypothecation and deal with them without any fear of consequences. Without notice to the borrowers the bank and their officers can enter and remain at any place where the hypothecated goods shall be and take possession «of, recover and receive the same or appoint any officer of the Bank as receiver of the hypothecated goods or sell by public auction or private contract or otherwise dispose of or deal with all or any part of the hypothecated goods. In the case of pledges even though the need for notice is waived the notice as a matter of prudence is given. In the case of hypothecation demand notice cannot be given beforehand because the possession is with the borrower and he can deal with the security in any manner he pleases before the expiry of the time stipulated by the banker in the demand notice for repayment of the advance. The borrower according to the terms of hypothecation remains liable for a short fall in the event of a forced sale. The bank is by the hypothecation deed irrevocably appointed the agent of the borrower with full powers regarding the disposal of the goods so that whatever action has to be taken the bank could do it without any further reference to the owner.

Disadvantages to the lender:-Possession and property in the goods remains with the borrower and only an equitable charge is created in favour of the lender. This is unsatisfactory position for the banker as he cannot have a preferential claim in the event of the insolvency of the borrower or in case of an attachment of the hypothecated goods by another creditor or if the goods are pledged by the borrower to a third party who has no notice of the hypothecation to the banker. It may be noted here that these open loan facilities are extended only to people of established reputation, and the fear of a criminal prosecution has indeed a deterrent effect even on somewhat dishonest borrower.

Open loans in favour of private individuals or a sole property concern are not very safe because in these cases the borrower alone knows what he is doing and no one else is interested in keeping a check over him as in the case of limited companies or partnership firms. Books of account as well as business dealings are kept secret and so banks have to depend mainly on the periodical statements submitted by the borrower. There is the possibility of the hypothecated goods completely disappearing over night if the borrower is thus minded. So it is better for the banker creditor to insist upon some collateral security in order to guard against such unhappy contingencies

Very often there is no possibility of goods hypothecated to bank being stored in a compact place and they may in the process of manufacture etc., be distributed in several places.

The banker has, in advances of this nature, to trust the borrower to a very large extent and depend on the books maintained and the stock statements submitted by him. A strict valuation as in the case of pledge is impossible in the case of hypothecation since the stock change vary frequently.

A purchaser in good faith of the hypothecated goods can defeat the previous creditor in whose favour the hypothecation was created. Even a subsequent pledge in good faith can defeat a prior hypothecation. So, the legislature must invent the key to unlock this problem. The Bills of Sale Acts of England are intended to solve this problem. A bill of sale, in its ordinary popular meaning is a document whereby the legal property in chattels is transferred to a person who lends money upon the security thereof when the possession does not pass; but the term “bill of sale” properly denotes any instrument whereby the property in chattels is transferred, whether absolutely or by way of mortgage. By a mortgage bill of sale ownership is transferred without possession. This ownership is mainly a right to seize. As H. G. Hanbury and C.H.M. Waldock opine a demon of clumsiness and ambiguity has beset the drafting of the Acts. As Lindely LjJ.said the legislature were aiming at rendering it compulsory on lenders of money on the security of goods & chattels to register their securities. A legislative venture without the pitfalls-and ambiguities of the Bills of Sale Act is indeed a desideratum in India. (All Rights Reserved)

The Holy Qur'an provides:—

"...............If a husband divorces his wife (irrevocably) he cannot, after that, remarry her until after she has married another husband and he has divorced her. In that case there is no blame on either of them if they re-unite, provided they feel that they can keep the limits ordained by God., Such are the limits ordained by God, which He makes plain to those who understand". (Chapter II, Verse 230).

One of the traditions cited in "Sahih Muslim", Imam Muslim's compilation of the traditions, dealing with this subject is quoted below:—

"Aisha (Allah be pleased with her) reported: A person divorced his wife by three pronouncements, then another person married her and he also divorced ber without having sexual intercourse with her. Then the first husband of her intended to remarry her......about such a case............Allah's Messenger (may peace be upon him)............ 1. said: Nountil the Second one has tasted her sweetness as the first one had tasted": (See "The Book of Marriage" in "Sahih Muslim").

Moulana Abdul Hamid Siddiqi in his English commentary on "SAHIH MUSLIM" explains the scope of these traditions as follows:—

"In these AHADITH we find a burial of the un-Islamic practice in regard to conjugal relationship. It was a sort of custom with the Pre-Islamic Arabia that they in order to torture their wives discarded them and took them back at their will.......Islam gave a death blow to this evil by imposing a limit on the right of the husband to divorcehis wife.........It means that divorce is not a plaything but something very serious; and thus no one is allowed to disturb the conjugal relations on whim and caprice. The husband should think hundred and one times before making the final decision and even the period allowed to him for decision is fairly long extending over three months. If, however, the parties agree to part with each other for the third time, then it is an irrevocable parting............Then there are very remote chances of the resumption of conjugal rights. The only chance is that the Second marriage also proves a failure and the second husband, out of his own will and not under presure, divorces the wife and the first husband with the willingness of his former wife is prepared to marry her again. Shah Waliullah, while explaining the significance of this injunction, has stated that the idea behind this command is that people should not take the institution of marriage and divorce as a mere plaything. They should be fully aware of their responsibilities in these important matters of life": (See Volume 2, Page 730; also K. P. Saksena 'Muslim Law" 4th Edition, P. 190).

A second marriage in violation of the above injunctions is void under Shiite law. The two disciples of Imam Abu Haneefa: Imam Abu Yusuf and Imam Abu Muhammad and also Imam Shafie also hold that such a marriage contract is void: (See Charles Hamilton: "The Hedaya", 1979 Edition P. 108). Thus, the parties who contract such marriages are guilty of fornication.

It is not clear from the reported decision whether the parties in Khadissa's Case are Shafies or Hanafies.

Even if the parties are Hanafies and Imam Abu Haneefa has observed that such marriages are irregular; not void, the courts have a discretion to follow the opinion of Imam Abu Yusuf and Imam Muhammad (See Tyabji, P. 38); and in the light of the prohibitory injunctions of the Holy Qur'an and the traditions and the circumstances under which those injunctions were revealed it is to be found that their opinion is correct and hence that should be followed.

It is unfortunate that the above aspects of the Islamic Law were not brought to the notice of the learned Justice.

The learned Justice has also made certain passing remarks in the judgment on standards of morality:—

"As for immorality, what is immoral has to be judged by the current standards of morality of the community. What was apparently regarded with pious horror in good old days would "today hardly draw a raised eyebrow or even a gentle tut-tut. The wife in this case had at no time a husband other than the respondent. I do but whether in the present day Indian Muslim Society such a woman who was her previous husband and who has married her a Second time can on account of such cohabitation be said to be immoral merely because the Second marriage is technically invalid in the eye of law. I am conscious that by leaving that matter at that, I am leaving it unsolved and open for discussion in the future, but that is inevitable in the development of law".

It is submitted with respect, that these remarks create an impression "that the Muslim community of the present time has restored the sex relations of the Pre-Islamic Arabia. It must be remembered that any standard of morality that is against the injunction of the Holy Qur'an and the traditions will be rejected outright by the Muslim Community. The learned Justice has not properly appreciated the Islamic conception of morality. "The sacred law of Islam as pointed out by JOSEPH SCHACHT in his book, "An introduction to Islamic Law" in Page 1. is an all-embracing body of religious duties, the totality of Allah's commands that regulate the life of every Muslim in all its aspects". The Muslims believe that the Holy Qur'an. in its 114 Chapters, embodies the final expression of God's will and purpose for man. The standard of morality of the Muslim community is an integral part of the religion and as such the question of change or reform does not arise at all.

As regards the second question, it was contended by the husband that since the second marriage was invalid, then the husband by such second marriage was no better than a stranger and so the wife had to be taken as having led an immoral life when she lived with him for about four months after the first divorce and the child begotten during that period had to be taken as illegitimate. It was, therefore, argued that the woman was not entitled to claim maintenance under Sub-section (4) of S. 125 of the Criminal Procedure Code.

"Chapter IX of the Code, which contains Ss. 125 to 128, deals with order for maintenance of wives, children and parents. Explanation (b) to S. 125(1) provides that for the purpose of this chapter "wife" includes a woman who has been divorced by, or has obtained a divorce from her husband and has not remarried. It is by virtue of this explanation that an ex-wife is entitled to claim maintenance from her erstwhile husband."

Under sub-sections (4) &(5) of S. 125 a wife who is living in "adultery" is not entitled to claim maintenance. Explanation (b) shall be regarded as a part of these Sub-sections also, since the language used in the statute is clear and unambigous, and therefore, on proof that an ex-wife is leading an immoral life her claim for maintenance is to be disallowed. This was the view taken by a Division Bench of the High Court, speaking through Khalid, J. in Kunhi Moyin v. Pathumma, 1976 KLT. 87. But, this decision has been overruled in Mariyumma v. Mohammed 1978 KLT. 573. The Full Bench, speaking through Mr. Justice P. Subramonian Poti, relying on the word "adultery" used in Sub-Ss. (4) and (5) of S. 125 held that the above Explanation is not applicable to those Sub-sections and so, the fact that an ex-wife is living in immorality is no ground for refusing maintenance from heir erstwhile husband. The learned Justices observe".....................A woman whose marital tie does not subsist cannot be guilty of adultery, for, adultery is a term that denotes an offence against the institution of marriage. The inclusive definition of the term "wife" will not be sufficient to read promiscuous or immoral living of a divorced woman as of one living in adultery".

This decision was followed in Khadissa's case in which it is held as follows:-"...............Maintenance was disallowed to the wife on account of her leading an immoral life. The Judge in doing that had evidently the provision in S. 125(4) of the Code in view For the provision to apply the wife should be living in adultery. If the second marriage was invalid then after the dissolution of the first marriage the wife should be taken as not having a husband at the time and her cohabitation with any man during that period cannot be termed adultery, as held in Mariyumma v. Mohammed Ibrahim, 1978 KLT. 573. So the Provision in S. 125(4) cannot be applied for refusing maintenance to the wife."

It is submitted, with respect, that the above decisions are not correct. In view of Explanation (b) to S. 125(1) the word "adultery" used in Subsections (4) and (5), in so far as they apply to ex-wives, has to be given a modified meaning. Maxwell observes:—"Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity which can hardly have been intended, a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence. This may be done by departing from the rules of grammar, by giving an unusual meaning to particular words, or by rejecting them altogether, on the ground that the Legislature could not possibly have intended what its words signify, and that the modifications made are mere corrections of careless language and really give the true meaning:" (Maxwell on the Interpretation of Statutes, 12th Edition P. 228).

In the light of the Explanation (b), the meaning of the words used in sub-sections (4) and (5) of S. 125 has to be modified to the effect that no woman who has been divorced by, or has obtained a divorce from her husband, and has not remarried, shall be entitled to receive an allowance from her erstwhile husband, if she is living in unlawful sexual relation and on proof that any such woman in whose favour an order has been made under the Section is living in unlawful sexual relation, the Magistrate shall cancel the order. If this was not the intention of the legislature, the words "for the purpose of this Chapter" would not have been inserted in the Section. When judged by the above submissions, the wife in Khadissa v Muhammed, who is guilty of fornication, is not entitled to any maintenance. It is absurd to believe that the Legislature would have intended to give protection to such women by enacting S. 125.

It is most respectfuly submitted that the above decisions require reconsideration.