PRIVY COUNCIL

                    (Chelikani) Venkatarayanim Garu

                    Vs.

Venkata Subadrayamma Jagapathi Bahadur Garu

                                  P.C. Appeal No. 21 of 1921
(Lords Buckmaster, Phillimore, CJ Sir John Edge, J. Sir Lawrence Jenkins and Lord

                                           Salvesen JJ.)

                    30.11.1922

                    JUDGMENT

Lord Buckmaster J.

1. Three questions are raised upon this appeal. They all arise out of the rights created
under a mortgage deed which was executed on the 2nd March, 1891, in favor of the
first plaintiff in the suit by he first defendant. The appellants are assignees of the
equity of redemption of that mortgage, and claim that in the accounts takes do
determine the true amount due under the deed, three mistakes have been made adverse
to their interests. The mortgage deed itself is in a peculiar form. It is a mortgage with
possession to secure the repayment of Rs. 1,80,000 with interest at the rate of Rs. 1
per cent. per month; the principal of the debt is to be repaid by sums of Rs. 10,000
payable year after year, begin ning on the 1st February, 1892, down to the 1st
February, 1898, and on the 1st February 1899 the entire balance of the debt and the
interest is to be paid. These installments are protected not merely by the security of
the mortgaged property but also by an express agreement in these terms : We shall pay
to you at Tuni, the principal according to the aforesaid installments and the whole of
the interest upon the entire debt calculated with reference to the installments along
with the last installment." There was a further agreement in the deed by which certain
charges which would be incurred by the mortgagee, when in possession, were fixed at
the sum of Rs. 4,000 per annum. They are specified as being the usual earth work
repairs annually done to canals, etc; expenses on account of the village headmen,
service Inams of village headmen, village deities contingent charges and other
business expenses. The deed also contained two further material provisions. The first
that notwithstanding the arrangements by which the mortgagee was to be put into
possession a lease was to be granted by him to the mortgagor for a period of two
years, and the second that if the provisions of the mortgage deed as to re-delivery of
the estate to the mortgagee by the mortgagor at the expiration of the lease for two
years were not carried out, the mortgaged estate should at the end of the time stand
sold to the mortgagee for the entire amount due inclusive of the balance of principal
and interest, and further that the mortgagor should not sell any portion of the estate to
anybody except the mortgagee. Arrangements were also made by which the mortgagee
was to pay all the necessary peishoush or quit rent or land cess, and a provision that if
that should be raised there should be a further right on his part to recover the money
from the mortgagor with interest as therein mentioned. What happened consequent
upon the execration of the deed was this : The lease for two years was duty granted to
the mort gagor, but at the expiration of the term he did not pay the second installment
due on February 1, 1893, nor did he redeliver pos session to the mortgagee. The
mortgages accordingly instituted a suit for recovery of possession and for the amount
of too second installment. To meet this a sum of Rs. 15,000 was paid into Court by the
appellants on behalf of the mortgagor, but possession was not delivered up by him and
he was in fact in possession at the time when the third installment became due.

2. Shortly before this date, namely on 16th January, 1894, the mortgagor executed a
sale dead for Rs. 1,60,000 for same of the mortgaged properties, and a mortgage for
Rs. 60 000 for the others in favor of the appellants, and requested them to pay to the
mortgagee Rs. 2,05,000, being the total Rs. 2,20,000 after deducting the Rs. 15,000
already paid into Court. The appellants accordingly, on the 10th February 1894
tendered the Rs. 10,000, due on the 1st February to the mortgagee, who refused to
accept the money upon the ground that there exited at that date a breach of the bargain
made by the mortgagor as to re delivery of possession, and that consequently his
acceptance might prejudice his rights. Their Lordships think that this is a mistaken
view of the rights which the mortgagee possessed. The agreement for the payment of
the installments of the purchase-money is in fact the main obligation of the mortgage
deed, and the whole of the other provisions, however extensive and far reaching they
may be, are really nothing but tea security to enforce this obligation. The acceptance
of Rs. 10,000 due on the 1st February, 1894, would not have prejudiced the mortgagee
in any way in the claim he had then pending against she mortgagor for possession, and
their Lordships think there was consequently no justification for his refusal of the
tender. The fact that the tender was nine days after the due date is of course
immaterial; accordingly, in taking the accounts, interest on the sum of Rs. 10,000
according to the terms of she dead must cease to be charged against the mortgagor
from the 10th Feb ruary, 1894.

3. On the 13th July, 1894, the mortgagee obtained a decree for possession, and entered
in pursuance of its terms, so that the agreement for the annual allowance of Rs. 4,000
for the particular payments to which reference has been made became operative, and
the next question is as to the validity of that agreement. It is urged on behalf of the
appellants that it gives the mortgagee a collateral advantage under the deed which he
is not entitled to exact, but their Lordships think that that contention cannot be
supported. The truth is that it is a fixed payment to be made in respect of a variable
charge, and though it may be assumed that the amount was not fixed so as to prejudice
the mortgagee, there is nothing to prevent the mortgagor and mortgagee entering into a
bargain as to what sum should be charged annually for expenses that may or may not
exceed the agreed figure. They therefore think the objection to the Rs. 4,000 cannot be
maintained.

4. There remains what is after all the most serious part of this appeal, and it is the
claim that in February, 1899, the appellants were willing and offered to make a tender
of the whole of the outstanding principal and interest, but that the mortgagee so acted
as to excuse the actual ten der being made, and that in consequence there is no longer
any right on the part of the mortgagee to debit interest in the mortgage accounts from
that date. This controversy depends upon the true meaning to be placed on two
important letters. The first is written on the 17th January, 1899, by the appellants to
the mortgagee. It refers to the mortgage and the assignments, and points out that the
balance of the monies payable by them to the mortgagor in respect of such transaction
- which appear to be stated erroneously at Rs. 2,25,000 instead of Rs. 2,05,000 - had
not been paid over but left with them for satis faction of the mortgage debt, and
concludes in this way. "It is requested that, on receipt of this letter, the amount
becoming due to you by that date from the estate may be made known at once. Soon
after receipt of your letter, we are ready to send respectable man with money and gat
the repayment of the amount of your debt made in full in the forenoon on the due date.
Your reply is requested." Both the Subordinate Judge and the High Court Judges,
before whom this case has been heard, have come to the conclusion that that was not a
bona fide offer on the part of the appellants. They say that they had not at that time
either the money or the control of the money that would have enabled them to meet
the tender of the large amount that was due upon the mortgage deed. Their Lordships
think, for reasons that will presently appear, that it is not necessary to consider that
question. It is very difficult indeed to say whether or no a man will be able to have
control of money at a future date, and the real question to be determined here is not
whether that money was within the power of the appellants but whether the mortgagee
in the letter he sent in answer to the offer definitely and unequivocally refused to
accept the money, were it tendered. Be fore reading this reply it is well to hear in mind
what has been stated by Vice-Chancellor Wigram in the case of Hunter v. Daniel 4
Hare's 420, as to the true position in such a case. He there says : "The practice of the
Courts is not to require a party to make a formal tender where from the facts stated in
the Bill or from the evidence, it appears the tender would have been a mere form and
that the party to whom it was made would have refused to accept the money." Their
Lordships think that that is a true and accurate expression of the law, and the question,
therefore, is whether the answer that was sent on behalf of the mortgagee amounted to
a clear refusal to accept the money. The letter is dated the 28th February, 1899, and is
in part in the form of an argument, and the substantial part is as set out in the record in
these words :- "As in the face of the suit instituted by us of late in the District Court of
Vizagapatam against the proprietor for possession of the entire proprietary estate of
Uratla held by as under the terms of our possessory mortgage deed, you have
purchased from the proprietor, as you have stated, daring the pendency of that suit and
subsequent thereto, with full knowledge of the conditions, and c, of our possessory
mortgage deed, and yet in contravention of the same and without necessity, a
considerable portion of the estate at different times for, Rs. 2,40,000 in favour of
yourself and others, there is no need for us to pay any of those amounts you state
under that head, in as much as the right to purchase that estate for that sale price has
vested in us."

5. The explanation of the earlier part of that paragraph is due to the provisions
contained in the dead which prohibit, so far as they had the power, just such a
transaction as that which had taken place. The latter part of the letter is unfortunately
an obvious mistake or misprint. Either it should run, "there is no need for us to
receive," or "there is no need for you to pay us any of those amounts you state under
that head." The better reading in favour of the appellants is the latter, "there is no need
for you to pay any of those amounts you state under that head inasmuch as the right to
purchase that estate for the sale price is vested in us." Accepting this as the true
reading, the meaning of the letter in their Lordships' mind is this, that the rights which
the mortgagee had conferred upon him have vested in him the whole of the estate and
that consequently the mortgage is at an end. It was an erroneous view based upon
invalid provisions in the deed, but it by no means followed from that that if in fact the
tender had been made of the whole of the principal money and interest which was due
up to that date, the mortgagee would not have accepted it, and it is re markable that in
the latter part of the latter he continues in these words :

       "In reply to the letter, dated 14th ultimo, from the Proprietor about the balance
       of demand after payments made, on the Pro prietary Estate of Kola Uratla, we
       informed him on the 27th instant, that the amount of debt due under our said
       deed was Rs. 3,19,946-2-2."
6. Now upon the view that this letter was intended to excuse the mortgagor from
making any tender at all under the deed, there could have been no possible reason for
stating what the amount was that was to be paid. The fact is that this letter contains a
reason why the tender is unnecessary, but the reason was wrong because the right to
buy according to the terms which the mortgage deed contained was a right which was
not enforceable in law. But it is on that hypothesis that they say there is no need for
payment to be made. If this were not accepted as correct, there is no thing to relieve
the appellants from making the tender. Their Lordships are unable to construe the
latter as equivalent to any such clear release to the mortgagor of his obligation to
tender the money as is required in order to justify him in not having presented it for
receipt. From that time to this nothing has in fact been ten dered. No money has been
paid into Court, and no effort on the part of the mortgagor has been made to satisfy his
obligations under the deed. Their Lordships, therefore, think than the appellant must
fall upon that part of his appeal. It follows, therefore, that the appeal succeeds, but
succeeds only to a very limited extent, but though it is small in relation to the part in
respect of which be fails; be does obtain some substantial relief which could not have
been obtained without coming before this Board, and their Lordships therefore think,
having considered all the circum stances, that be ought to have one-half of the taxed
costs of the appeal, and they will humbly advise His Majesty accordingly.

Appeal allowed in part.