542 INDIAN LAW REPORTS. [VOL. XLIV.

PRIVY COUNCIL/

PX'.« MAUNG SHWE GOH

1916
____ V.

’ MAUNG INN.
[§M APPEAL FROf^ THE CHIEF C0U3T OF LOWES BUMlfl.]

Mortgage—Agreement [mtponing paymenl of interest and selling inoperty to

mortgagee^ if not then paid— Comtruction of contract— Made of CAilcnlat-
iiig the manner o f payment of inircha^-e-money urnhr the contract on
execution of decree f .'T specific performancb— Delay in iranaftn' of
property io mortgagee— Riiles of English Courts as to rights of Vendor
arid Purchaser— Transfer q-^Property Act {IV o f 1SS2)^ s 54.

A mortgage deed of certain laud wa-< executed in favour of tlie appel­

lant to secure re-payment of Rs. 60,000 with iutereet, wliicli tiie mortg'agor
expressly covenanted to pay, on 30th December 1905, which was afterwards
extended for three months from 3rd January 1906. On 4th April .I9(j8 the
. mortgagor, being unable to pay the interest, wrote as follows to the mort­
gagee : “ 1 write this to inform you that as I have not got the interest due
on Es. 50,000 ready now, T request you to give ms three months more for
payment to you of all interest due thereon. Should I fail to do so on or before
6th July 1905, I agree to the whole land being sold to you for Rupees one
lakh (Rs. 1,00,000.).: After deducting out of this amount Rs. 50,000 ■
already received by me and all interest due thereon, the balance should be
paid to me when the land shall become yours unconditionally.” The
mortgagee agreed to these terms, and the loan was renewed^ on 6th April
1906, the interest was not paid on 6th July, and the mortgagor refused
to execute a conveyance of the property. In a suit for specific perform­
ance of the contract of 4th April 1906, the mortgagee obtained a decree
in May 1909, hut he only entered into possession of the property on
24th March 1911. On an application for execution of the decree, a question
arose as to the manner in which the purchase money payable under the
contract ought to be calculated, and an Appellate Bench of the Chief Court
decided that the mortgagee was only entitled to bring into account the
amount due for principal and interest up to 6th July 1906
Held hy the Judicial Committee (reversing that decision),' that: on: the'
true construction of the contract, the appellant was entitled to: deduct

Present: T he Lord Chanoelloe (Loud Buckmaster), Loud, Atkinspn;

Lord Wbe.nburil' and Mr. Ameer AlI; ’
YOL. XLIY.] CALCUTTA SERIES. 543
interest up to tlie date of hiH getting possession. The general rules by - 1916
which th e rights of vendors and purchasers are regulated were not appli-
cable here, because the rights as to the payment of interest were governed
by the express provisions of the contract. w.
SemhU : The rules o f English G.mrts of Equity had no application to Inn .
the sale of real estate in Lower Burma, section 54 of the Transfer of
Property Act expressly providing fhat (apart from a registered instrument)
such a contract created no interest in, or char_;e upon, the land.

A ppeal N o. 153 of 1915 from a judgment and decree

(14-tli December 1914) of tlie Chief Court of Lower
Burma on its appellate side whicli reversed a judg­
ment and order (ITtli December 1912) of tlie same
Court on its original side which liad affirmed an order
(3rd September 1912) of the 2nd Deputy Registrar of
the same Court.
The petitioner in execution of decree was the
appellant to His Majesty in Council..
The question in dispute arose in the matter of the
execution of a decree for the specific ]3erfofmance of a
contract by which one Gr. W. Davis (b o w deoeased,
represented by Maung Inn the Adm.inistrator
Ute of his estate) agreed to sell to the appellant cer­
tain lands and buildings which had been previously
mortgaged to the latter by Davis. The issues foE.
decision in this appeal were whether the appellaht
was entitled to set off against the purchase-money the
interest payable under the mortgage up to the; date
when possession was actually obtained by him, or
whether he was only entitled to set off sacli interest
up to the date when the Contract should have beeii
performed; and whether in the latter case the repre-"
sentatives of Davis should be ordered to a<3coant jo r
the reniis and profits from the date oil ^hic^^^
contract should have been performed to the date on
which: the possession of the^^^l^ l3uildings Was
actually obtained by the appellant.
544 INDIAN LAW REPORTS. [VOL. XLIY.

1916 Thb mortgage of the lands and biiiidings b y B avis

lilAu^'G the appellant was executed on 30th Se]3tember 1905
Shwe G oh to secure to the appellant payment of Rs. 50,000 on
MAnxfi'rKN. 30fch of December 1905, togetlier with interest at the
rate of 8 annas per cent, per mensem, and also interest
at the current bank rale of interest in Rangoon, The
time for payment was afterwards extended to three
months from the 3rd January 1906.
On 4 th AiDril 1906 Davis wrote and signed the
following letter to the appellant:—
“ I write this to inform you that as I Ijave not got the interest due on
Rs, 60,000 ready now, I request you to give me three months more for pay­
ment to you of all interest due thereon. Should I fail to do so on or before
the 6th July 1906.1 agree to the whole land being sold to you for. Rupees
one lakh (Rs. 1,00,000). After deducting out of this amount Rs, 50,000
already received by me and ail interest due thereon, the balance should be
paid to me when the land shall become yours unconditionally.”
The appellant ac(;epted those terms and renewed
the loan on 6th April 1906. Davis did not pay any
interest on or before the 6th July 1906, and after a
demand requiring him to carry out the agreement of
4th April which was refused the appellant on 17th
August 1906 bimight a suit against Davis in the Chief
Court of Lower Burma for specific performance of that
agreement, or in the alternative for Rs. 1,00,000
damages for breach of contract. In defence Davis
denied that he signed the letter of 4th April, but
alleged that even if he did the contract could not be
specifically enforced as it restricted his right of
redemption.
The suit was heard by M oorb J. who held that
the appellant had failed to prove that Davis had
signed the letter of 4th April 1906, and consequeiitly
dismissed the suit with costs; but that decision w^
on appeal reversed by the Appellate Court (Sir 0. Fox
aM P aelett J.) which, 051 the L1th. May 1909, made
a decree for specific performance of the agreement
YOL. XLIY.] CALCUTTA SERIES. 545

contained in that letter. That decree was af&rmed, on

appeal by Davis, by the Judicial Gonimittee of the matog
Privy Comicil on 14th June 1911. The appeal is G
s h w e oh

reported in I. L. R, 38 Calc. SOI.- L. E, 38 I. A. J55. Mavng Inn,

The execntion proceedings which gave rise to the pre­
sent appeal were commenced on 17th December 1909
by an application of the appellant to the Chief Court
of Lower Burma for execution of the decree for s|)eci~
fic performance of the 1.1th May 1909, which was then
under appeal to the Privy Council, by the execution
of a conveyance of the mortgaged property to the
appellant. Davis not appearing, an ex parte order for
execution was made, but was eventually set aside on
the ground that notice of the applieation. had not been
duly served on Davis : and subsequently the rehearing
of the application was postponed from time to time,
and-ultimately uniil the final decision of the appeal
to the Privy Council bad been given. Meantime, the
aiDpellant obtained i}ossessiGn of the lands and build­
ings (the sabject of the salt) on Mth March 19J Iv
and on 26th June he filed an affidavit stating that fact
and showing tliat the total amount due under the
mortgage for princixjal and interest up to the date
when he so took possession, was Rs. 87,1:52-6-5.
After the order of the Privy Council dismissing
Davis’ appeal, the application for execution was
restored to the list, and the hearing fixed for llth
August 1911. Applications were then made by the
2nd and 3rd respondents (Khorshed and Burjoriee).
Khorshed was a mortgagee of the property in suit for
Ks. 30,000: under a mortgage executed by Davis oh
11th March 1909 ; and Burjorjee was a mortgagee of the
property for Rs. 40,000 and: Rs. 10,000 respectively
under two mortgages executed by Davis both dated
3rd January 1910. Both mortgagees claimed to be
entitled to charges or liens on the purchase-nioney
546 INDIAN LA W REPORTS. fVOL. X L IV .
191 6 to bs paid into Court by the appellant. They were
M aujts both added as parties to the proceedings without
S h w e G oh prejudice to the right of the appellant to raise the
V.
I>1a u n g I n n . question of the effect of the doctrine of Us pendens.
Davis died on M-th August 1911 and Maung Inn,
the 1st respondent, was sulVstituted for him on the
record.
The application for execution came on for re-hear­
ing before the 2nd Deputy Registrar of the Chief
Court on oOth August 1912, when the ]sL respondent
did not appear, but the 2nd and 3rd respondents
appeared by counsel, who raised (inter alia) the j)oint
that the appellant was not entitled to interest under
Ills mortgage after the 6t'h July 1906, the date on
which the contract for sale should have been i)erform-
ed, and that was the only question now material to
this appeal.
On the 3rd September, the Deputy Registrar found
that the appellant’s mortgage d id .not become extin­
guished on 6tli July 1906, and that it being a con-
tinuiog mortgage and having priority over the mort­
gages executed in favour of the 2nd and 3rd
respondents, the appellant w’as entitled to interest
under it up to 24th March 1911, when he obtained
possession of the lands and buildings. The De|)uty
Registrar also found that the amount due to the
appellant for principal and interest on Ida mortgage
up to 23rd March 1911 was Rs. 85,784-5-1, and ordered
a conveyance to him to be executed.
On 1st October 1912, the 2nd respondent petitioned
that the order made by the Deputy Registrar should:
be referred to a Judge of the Chief Court *‘ and it
aecordlDgly came before Ormoi^d J., who heM that on
the true construction of the agreement of 4tli A.pril
1906, the- amount due under the mortgage at the date
of : the completion was to be deducted from
YOL. XLIV.] CALCUTTA SEEIES. 5i7

piircliase-iiLoney, and that the rights of the appeUant

under the mortgage were to continue until Davis had mauno
complied with the agreement. O rmond J. conse-
quently ni^held the decision of the Dex^nty Registrar, M aung In n .

and dismissed the second respondent’s aiDplication.

From that decision the 2nd respondent axjpealed
making resp>ondents the appellant and the 1st respond­
ent, and submitting that on a proper constriicfcion of
the agreement of 4th April 1906 the estate of Davis
was not liable to the api^ellant as mortgagee after three
months from that date ; that the second respondent
Vvas a mortgagee prior to the agreement of 4th April
1906, as his mortgage of lltli March 1909 had been
made in j)tirsuance of an agreement of 31st January
1906 for securing the repajmienfc with interest of
Es. 30,000 lent to Davis; that the rights of the 2nd
resx^ondent as mortgagee could not be affected by any
act o f ; Davis; that the ai3pellant was entitled to
mesne x)rofits as against Davis; and that in any case
after 11th May 1909 interest ceased to run in favour of
the ax^pellant.
On 14th December 1914, the Chief Court on its
appellate side (S ir Ghaeles F o x , Chief Judge, and
P ae lb tt J.) held that tlie agreement of 4th April 1906
contemi:)]ated that the land should belong to the
ax^pellant if Davis did not x^ay the interest due on the
mortgage before 7th July 1906, and if the ax^pellant paid
Davis the difference between the amount due on the
mortgage up to that date and a lakh of rupees; and that
both parties must have contemplated that the liability
of Davis to pay interest on the niortgage after that
date should cease and that therefore the appellant
became in eguity the owner of the property irom ;7th
July 1906, on which date the liability of Davis to
pay interest on the mortgage ceased, the appellant
becoming entl tied to the rents and i^^'oflts, and Davis
548 INDIAN LA W REPOETS. [VOL. XLIV.

1916 becoming entitled fco receive from the'appellant' iiiter-

Mafng amonnt of money the latter should have paid
S h w e G oh on that date. The Appellate Ooiirt Iiii’ther held that
iiA tTM I n n . fact that the appellant omitted to claim the rents
and profits in his suit for si3ecific performance did not
enable him to obtain subsequent interest after the
date on which he in equity became owner ol; the pro-
l^erty. The Appellate Court therefore allowed the
appeal, and ordered that an account should be taken
of what was due for principal and intere.^t on the
mortgage up to the 7th July 1906, and that the appel­
lant should i^ay into Court the difference between
that amount and oue lakh of rupees.

On this appeal,
Sir H. Krle Riohards, K. C., and F. J. Goltmaii, for
the appellant, contended that on the true construction
of the contract of 4th April. 1906 interest was not to
cease on 6th July 1906, but was to be paid under the
mortgage up to the date of the actual comj^letion of the
sale, or up to the date on which the appellant received
X30ssessLon of the lands, aud that w£is the amount of
interest to be deducted from the purchase-money.
The Chief Court was Wrong in holding that the
mortgage must be tai^en as becoming merged in the
appellant’s ownership of the land on 6th July 1906.
The rule that by the' English doctrine of equity the
property vested in the j)urchaser on the date fixed for
completion of the contract, was not ai^plicable here
because the purchaser w’’as kept out of possession by
the vendor; and because by section 5i of the Tra.nsfer
of Property Act (lY of 1882), a contract for the sale of
land does not, apart from a registered instrameht,
create any Interest in the land. That sectidii applied
to Lower Burma, and excluded the rule of English
eqiiity. Eefereiice was made to the Burma Grazette,
YOL. XLIY.] CALCUTTA SERIES. 549

Part I, page-684 ; Dart’s Vendors aiicVPurchasers (7th

ecL), YoL I, pages 652, 653; and Stokes’ Anglo-Indian maung
Codes, YoL T, page 730. Shwe Goi?
Gunlijfe, K . C., and D. Cotes Preedij (for Kenelm madng I nn.

Pi^eedy serving with His Majesty’s Forces), for the

second and third respondents, contended that interest
was not payable iinder the mortgage after 6th July,
1906; the letter of 4th April 1906 was a clear agree­
ment between Davis and the appellant that the latter
was, if the interest d^ne was not x^aicl, to take over the
mortgaged property "as from 6th July. The relation
between the parties then changed to that of vendor
and purchaser; and the mortgage became merged in,
or extinguished by, the appellant’s title as purchaser,
and as held by this Board in Davis y . Mauyig Shive
Qoh (1), the relation of mortgagor and mortgagee with
the right ol the former to redeem, came to an e n d ;
Noakes Y. (2) per Ijord Macnaghten [JSorf? A tkin-'
son referred to Birch v. Joj/ (S), as to rights in equity
between vendor and purchaser before completibn]-
The appellant should get only the rents and profits
of the property from 6th July, 1906, less the interest
due on the balance of the jnirchase money payable to
the vendor.
Sir H. Erie EicJiards, K . G., replied.

The judgment of their Lordshipl was delivered by

T h e L o r d C h a n c e l l o r . This appeal is a step—
and their Lordshix3S hope the last stex)-—in litigation,
which was commenced on the 17th August, 1906, by
the present appellant, who claimed against one 0eorge
William Davis specific performance of a contract
dated the 4th April, 1906, for the sale of some 19,318
acres of land situate In the Pegu, district, Low^r
(1) (1911) I. L. B. 38 Calc. 805 ; (2) [1902] A. 0. 24, 30.
L. E. 38 L A. 155. (3) (1852) 3 H. L. G. 566, 590.
550 INDIAN L i W REPORTS. [VOL. XLIV.

1916 Banna. Tlie question raised depends on tlie true

MiUNG construction of this contract, but in order to under-
S h w e G oh gfcaiid its meaning it isnecessary to consider some
•muNG Ln’x. antecedent facts.
On tlie '6Qtli September, 1905, a formal mortgage of
. the property, which subsequently became the subject
of the contract, was executed by the deteiidant Davis
in favour of the appellant to secure the repayment of
50.000 rupees on the 30th December, 19)5, together
with int'erest at the rate of 8 annas ver cent, per
month, and also interest thereafter at the current
bank rate of interest in Rangoon. It appears from the
nioriigage that it was really given as securifc,y for the
payment of 50,000 rupees, the amount of 5 hundis
which Iiad been drawn by the mortgagor upon the
mortgagee and negotiated by the mortgagor witii the
Bank of Bengal. The mortgage contained a formal
conveyance of real property and a covenant, the effect
of which has aiieady been mentioned. It also con­
tained a further and independent covenant that if
the sum of 50,000 rupees should not be paid when it
was due, the mortgagor would pay interest thereon at
8 annas per cent, i^er month, and also interest on the
50.000 rupees at the current bank rate until the princi­
pal should be duly paid. The hundis were not met by
the mortgagor at the due date, and were renewed until
the 4th April 1906, on which date the mortgagor, not
being in a position to |)ay the money, wrote to the
plaintiff a letter in the following terms
“ My dear Maung Shwe Goh,
“ I write this to inform you that as I hava not got the intorost due on
50.000 rupees ready now, I request yon to give me three rnorifclia more.for
payment to you of all interest due 'thereon. Should I fail to do so on or
before the 6th July, 1906, I agree to the whole land being aold to you for:!
lakh rupee.! (100,000 rupees). After deductiag out of tlsis amount 50,000
rupees alread}!' received by me and all iatere.^t due thereon, the balance
should be paid to m3 when the land shall become your.'^ unconditionaUy.” '':
TOL. XLIV.] CALCUTTA SERIES. 551

The request was aGceded to b y the plaintiff, and

the contract thus made is the„ contract in question. maung
The money was not paid by the date fixed, and on
the 6th July 1906, til® mortgagee paid to the Bank of mahng Inn.
Bengal the 50,000 rupees due on the hundis, and thus
became entitled to whatever rights were conferred
upon him by the agreement. The mortgagor refused
to execute a conveyance of the proiDerty to the
plaintiff, indeed lie denied the authenticity of his
signature to the contract, and thus compelled the
plaintiff to institute the proceedings out of which this
appeal has arisen.
The learned Judge by whom the suit was heard
dismissed it on the 18th February, 1908, but this
judgment was reversed by the Giiiel Court of Lower
Burma, and by tlieir order of the 11th May, 1909,
specific performanc3 of the agreement contained in
theletter of the 4th April, 1906, was ordered against
the mortgagor, and this order was affirmed on appeal
by this Board on the 5th July, 1911,
The defendant Davis died on the 14th August, 1911,
and the first respondent to this appeal is his legexl
representative. The other respondents represent
mortgagees from Davis under mortgages execiited
subsequently to that in favour of the plaintiff.
The appellant entered into possession of the pro-
psrty on the 21th M^arch, 1911, but it does not appear:
that even up to the present time a proper conveyance
of the eqnity of redemption has ever been executed la
his favour, an order obtained from the Oourt on the
25th January, 1910, directing such eonveyance to be
executed on behalf of Davis by the Assistaat Registrar^:
having been set aside upon ,the grounds that ^
notice of the application had not been served upon
'.'.Davis.'
The i)resent appeal arises out of an application
552 INDIAH LA W REPOETS. [VOL. XLIV.

1916 wliLcli is in form for execution of the Judgment for

m ^g specific performance, and the question involved affects
Shwe Gfon only the manner in wnich the purchase-money
Mad*ng I n n . payable under the contract for sale ought to be calcu­

lated. On the part of the appellant, it is contended

that interest continued to run npon his mortgage until
the date when he entered into possession, that conse­
quently the principal sum of 50,000 mpees, together
with the agreed interest up to that date, ought to be
deducted from the 100,000 rupees, which was the pur­
chase i)rLce, and the balance only should be paid by
him. This view was accepted by the Registrar and
his decision V7as u|)held by the Judge of the Chief
Court, but was reversed by the Appellate Court, who
decided that the apj)ellant was only entitled to bring
into account the amount due for j)rincipal and interest
up to the 6th July, 1906. The foundation of this judg­
ment depends upon the application to the contract
of the •ith.April, 1906, of the well-known rule by
which the rights of vendors and purchasers of real
estate are regulated in this country. In the English
. Courts, a contract for sale of real property makes the
purchaser the owner in equity of the estate, and from
this principle ifc follows that, where the rights as to
payment of interest on tho j)ii-i'chase-m.oney are not
regulated by the terms of the contract, the purchaser
is deemed to be entitled to the rents and i)rofits of the
property, as from the time when he did take, or could
safely have taken, possession; and interest on the
l^urchase-'inoney runs in favour of the vendor from
that time. It has been pointed out to their Lordshi|)S
that the underlying principle, upon which this rule
depends, has no apx^lication to the sale of real estate
: in Lower Burma, since by section 54 of the Transfer^
of Proi^erty Act, 1882 (a statute made applicable to
Lower Burma), it is expressly provided that such a
YOL. XLIV.] CALCUTTA SERIES. 553

contract creates no interest in or cliurge iwon the land,

If, therefore, the contract was silent in dealing with maung
the question of interest, their LordshipH think that Shwe Goh
the appellant wonld have strong ground for contend- m a u n g Lnn.
ing that the reasoning in the Court of Appeal could
not l33 supported. It is an unfortunate fact that this
argument never appears to have been raised at any
earlier stage of these proceedings ; and their Lordships
have not, therefore, the advantage of the opinion of
the Isarned Judges of the Appellate Division ui3on
this point. But the matter need not he pursued
because, in their Lordships’ opinion, apart altogether
from this consideration, ui3on the true construction
of the contract the aiDpellent must succeed. At the
date when the contract was executed a valid legal
mortgage was on foot, containing an express covenant
for payment of the 50,000 rupees and interest until
the debt was discharged. The money v^as dtie; when
the contract was made, and the contract opens with
the request for three mouths’ further time for payment
of the interest due thereon.” In this connection^
it is clear that the “ interest due thereon” is the
interest payable under the mortgage deed up> to the
time, whatever it maybe, on or before the 6th July>
1906, when the 50,000 rupees might be paid. On
failing to pay at the date, the agreement became oper­
ative for sale of the land, and the final words, in tHeir
Lordships’ view, which iirovided for deduction from
the purchase price of the 50,000 rupees “ and all inter­
est due thereon,” means that this deduction should
be made at the time when the balance is to be paid,
and this would be the completion of the contract,
■The mere fact that the phrase “ interest due thereon ” *
occurs twice in the contract does not involve the
conclusion that the date up to which interest is to be
calculated is the same on both occasions, but when
554 INDIAN LAW REPOKTS., [YOL. X L IY .

191G once it is accepted that the dates are different all

JiAuxG difficulty disappears, since it then follows that interest
shwe Go:: ig bj. agreement continning to ran on the principal
Maung In-.';- money. Tliis interest is that reserved under the mort­
gage deed, and it mnst continiie to ran nntil the debt
is discharged, which can only be when the balance is
struck ani paid. If, therefore, possession had not
been taken by the parchaser, and no default could be
attributed to him, the interest would have gone on
until the transfer was execiited, bat it appears that
he has been put into possession under the contract,
and of course he coald not both retain the rents and
receive the interest. The order therefore of the Regis­
trar was quite right iji allowing interest up to, bat
not beyond, the date when he took i)ossession.
Ooansel for the respondents has urged that, by
virtae of the contract, the mortgage was ended, since
a mortgagee, who lias contracted to buy the equity of
redeniiDtion, stands in th« position of a x>'-T-rchaser„
which is inconsistent with that of a mortgagee. But,
whatever might result from such argument, where
the rights of the parties were entirely untouched by
the terms of the contract, such consideration cannot
apply where the contract has itself i^rovided what th<^
rights are to be. This, in their Lordships’ opinion,
is what the contract did, and they therefore think that
the appeal succeeds.
The order appealed from must therefore be reversed
with costs here and below, and the order of the Judge
of first instance restored. The res];)ondents will repi’iy
any costs paid to them by the ax^pellant. Their Lord­
ships will humbly advise His Majesty accordingly.
' Appeal allowed.
Solicitors for the appellant: A rn ou ld ^ ;
Bolicitoi’S ior the 2nd and 3rd respondents i
ham ^ Sms,