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MD. Ibrahim v/s The Northern Circars Fibre Trading Company, Cocanada, & Others

Company & Directors' Information:- S S S FIBRE LIMITED [Active] CIN = U17110PB2005PLC027818

Company & Directors' Information:- NORTHERN TRADING PRIVATE LIMITED [Active] CIN = U51109DL2000PTC107554

Company & Directors' Information:- M.D. TRADING CO. PVT. LTD. [Strike Off] CIN = U67120WB1992PTC056344

Company & Directors' Information:- G L FIBRE PRIVATE LIMITED [Strike Off] CIN = U17112PB2010PTC033873

Company & Directors' Information:- INDIA FIBRE PVT LTD [Active] CIN = U17232WB1968PTC027401

    Appeal No. 343 of 1942

    Decided On, 06 April 1944

    At, High Court of Judicature at Madras


    For the Appellant: Messrs. C.H. Raghava Rao, K. Rajah Ayyar, A. Satyanarayana, Advocates. For the Respondents: Messrs. P. Somasundaram, P. Suryanarayana, Advocates.

Judgment Text

(Prayer: Appeal (disposed of on 6-4-1944) against the decree of the Court of the Subordinate Judge of Cocanada dated 23-12-1941 and passed in O.S. No. 83 of 1935.)

Krishnaswami Ayyangar, J.

The appellant in this appeal was the fifth defendant in the suit out of which it has arisen. He is the assignee of a mortgage decree obtained by the third defendant on a mortgage executed on the 6th July, 1934 by defendants 1 and 2 over the property known as the South India Bone Mills at Samalkot. The property comprised land as well as the plant and machinery installed thereon for the manufacture of bone meal. The mortgagors were the owners of three other mills also with which however we are not concerned in this appeal. Prior to the execution of the mortgage aforesaid, the mortgagors had on 16th November 1933 entered into an agreement with plaintiffs 2 to 4 who were carrying on a business under the name of the Northern Circars Fibre Trading Company, Cocanada, which was the first plaintiff in the suit. By this agreement the second defendant who was doing business in the name of C. Raju, Import and Export Company, Cocanada, impleaded as the first defendant to the suit, entrusted the management of his several mills to the first plaintiff for a period of two years. The Northern Circars Fibre Trading Company, who were thus entrusted with the management, undertook amongst others to invest a sum of Rs. 25000 in cash in the business and this amount was to carry interest at 12 per cent per annum. They were referred to in the agreement as the dubashees. It was a term of the agreement that 'the monies invested by the Dubashees shall be a first charge on the assets of the firm.' The plaintiff instituted the suit for the recovery of a sum of Rs. 66746-9-9 as due to them in respect of the moneys invested by them in the business together with interest and the commission earned by them. The y also claimed to be entitled to a first charge on the machinery in the mills, the stock-in-trade and the goodwill of the business. The agreement of the 16th November, 1933 had not been registered under the provisions of the Indian Registration Act, but the plaintiffs claimed that the provisions of the agreement relating to the charge were nonetheless effective in so far as the moveables viz., the plant and machinery and the stock-in-trade were concerned.

Subsequent to the institution of the suit a compromise was arrived at between the plaintiffs and defendants 1 and 2 by which these defendants agreed to pay plaintiffs 2, 3 and 4 a sum of Rs. 35,000 in full satisfaction of the claim in suit. Defendants 3 and 4 who were not parties to the compromise contended that the dubashee agreement in so far as it purported to give the plaintiffs a charge over the plant and machinery in the South India Bone Mills at Samalkot was invalid for want of registration because the said plant and machinery were immoveable property. The suit was first tried in July, 1937 by Mr. Bhaskara Reddi, the then Subordinate Judge who pronounced judgment on the 19th July, 1937 dismissing the suit on the ground that though the agreement purported to create a charge over moveables as well as immoveable properties it was invalid for want of registration not only in respect of the immoveable properties but also in respect of the moveable properties because the two sets of properties were inseparable from one another and the charge therefore failed in its entirety. The plaintiffs appealed to this Court in A.S. No. 320 of 1937. The judgment of the Subordinate Judge was reversed and the case was sent back for rehearing, this Court holding that it is possible to separate the movable and the immoveable assets and the charge should be regarded as valid in so far as the moveables were concerned. The case then came up before Mr. R.M.V.S. Rao for fresh trial and he pronounced his judgment on the 23rd December, 1941 decreeing the suit in so far as the plant and machinery installed in the mill were concerned on the ground that they constituted moveable and not immoveable property. The fifth defendant who, as we have said, is the assignee of the mortgage decree obtained by the third defendant has preferred this appeal.

The only question raised in the appeal is whether the Subordinate Judge is right in holding that the machinery installed in the premises of the factory at Samalkot is moveable property. The learned Judge has found that the main machine is installed on a small cement platform to which it is fixed by means of bolts at the four corners. It is also held in position by being attached to iron pillars fixed in the ground to a depth of nearly 6 or 7 feet. At the same time he was of opinion that the machine can be dismantled into parts and conveniently removed as it is not difficult to break the platform and pull out the iron pillars to which the machine is secrewed down. He came to the conclusion that the machinery was moveable property by asking himself the question whether the mill (machinery) existed for the land or the land existed for the mill (machinery), that is whether the mill is of primary importance and the land only of secondary importance in this case or vice versa. His view appears to be that the bone mill stands embedded in and attached to the earth not for the beneficial enjoyment of the land in which case alone it should be regarded as immoveable property but for the beneficial enjoyment of the mill itself which therefore remained notwithstanding the attachment moveable property only. After the best consideration we can give to the question we are of opinion that the learned Judge's decision cannot be supported.

The real question which falls to be decided in this appeal is whether the writing evidenced by the dubashee agreement referred to above is required by law to be registered because it purports to create a right, title or interest in immoveable property of the value of Rs. 100 and upwards. It is common ground that the value of the machinery is more than Rs. 100 and if it is immoveable property, the agreement requires registration in order that the charge may take effect. If the machinery however is moveable property, the agreement does not, of course, require registration.

'Moveable property' is defined in S. 2 Cl. 9 of the Registration Act as including

'standing timber, growing crops and grass, fruit upon and juice in trees, and property of every other description, except immoveable property.'

The machinery in question not falling within any of the enumerated species of moveable property referred to in the section, it becomes necessary to enquire whether it is property of a description other than immoveable property. Turning to the definition of 'immoveable property' in Cl. 6 of the same section we find it is stated that it 'includes land, buildingsand things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass.'

From this definition it is clear that what is really moveable property may become immoveable property if it is attached to the earth or permanently fastened to anything which is attached to the earth. The Transfer of Property Act, 1882, relating to transfers of immoveable property contains in S. 3 a definition of the expression 'attached to the earth' for purposes of that Act. The definition is this:

'attached to the earth' means

(a) rooted in the earth, as in the case of trees and shrubs;

(b) imbedded in the earth, as in the case of walls or buildings; or

(c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached.'

It was argued for the appellant that the question whether the dubashee agreement requires to be registered or not is primarily to be decided on the language of the definition of 'immoveable property' contained in the Registration Act rather than on that to be found in the Transfer of Property Act. The Transfer of Property Act, it will be remembered, governs charges created on immoveable property. S. 100 states that, 'Where immoveable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge.'

One of the provisions here alluded to is that contained in S. 59 which makes instruments creating a charge in respect of property of a value over Rs. 100, compulsorily registerable. If we now turn to S. 4 Transfer of Property Act we find it says that S. 59 is among a group of sections therein mentioned which should all be read as supplemental to the Indian Registration Act, 1908. So far as the question of registration is concerned, we think that the two Acts are in pari materia and it will therefore be wrong to construe the definition of 'immoveable property' in the one Act as being different from that in the other, in the absence of words clearly pointing to a distinction. Coming back to the definition of 'immoveable property' in the Registration Act and leaving out the several species of immoveable property enumerated therein which are also different from the property here under consideration, it will be seen that the governing principle with respect to immoveable property in general is stated in the following words, 'things attached to the earth or permanently fastened to anything which is attached to the earth.' The first part of the definition implies that what is really moveable property may become immoveable property by being directly attached to the earth. The second part indicates that though the attachment is not direct, still if the moveable property is fastened to something which is directly attached to the earth, it will be immoveable property for the purpose of this Act. The Transfer of Property Act, as we have already observed, contains a definition of 'things attached to the earth', but not of 'things permanently fastened to anything which is attached to the earth.' We are however loath to accept as correct a dissection and analysis of the definition given by the Registration Act for the purpose of giving it a wider scope than what is expressed in the definition contained in the Transfer of Property Act. Indeed, it seems to us that Cl. (c) of the latter definition which refers to a mediate and not a direct attachment is substantially what is referred to in the second part of the definition in the Registration Act. The inquiry should accordingly be not whether the attachment is direct or indirect but what is the nature of the attachment and what its object and purpose. The question is often a difficult one, but certain rules have been laid down in the decided cases for guiding the Court. The classic statement of the law on this point is that contained in the judgment of Blackburn, J. in Holland v. Hodgson (1872) L.R. 7 C.P. 328) where looms attached to the floor and beams of a worsted mill were deemed to be fixtures. It was observed, 'There is do doubt that the general maxim of the law is, that what is annexed to the land becomes part of the land; but it is very difficult, if not impossible, to say with precision what constitutes an annexation sufficient for this purpose. It is a question which must depend on the circumstances of each case, and mainly on two circumstances, as indicating the intention, viz., the degree of annexation and the object of the annexation. When the article in question is no further attached to the land, tha n by its own weight it is generally to be considered a mere chattel: See Witshear v. Cottrell (1853) 1 E. and B. 674) and the cases there cited. But even in such a case, if the intention is apparent to make the articles part of the land, they do become part of the land: see D'Eyncourt v. Gregory (1866) L.R. 3 Eq. 382). Thus blocks of stone placed one on the top of another without any mortar or cement for the purpose of forming a dry stone wall would become part of the land, though the same stones if deposited in a builder's yard and for convenience sake stacked on the top of each other in the form of a wall, would remain chattels. On the other hand, an article may be very firmly fixed to the land, and yet the circumstances may be such as to show that it was never intended to be part of the land, and then it does not become part of the land. The anchor of a large ship must be very firmly fixed to the ground in order to bear the strain of the cable, yet no one could suppose that it became part of the land, even though it should chance that the ship-owner was also the owner of the fee of the spot where the anchor was dropped. An anchor similarly fixed in the soil for the purpose of bearing the strain of the chain of a suspension bridge would be part of the land. Perhaps the true rule is, that articles not otherwise attached to the land than by their own weight are not to be considered part of the land, unless the circumstances are such as to show that they were intended to be part of the land, the onus of showing that they were so intended, lying on those who assert they have ceased to be chattels, and that, on the contrary, an article which is affixed to the land even slightly is to be considered as part of the land, unless the circumstances are such as to show that it was intended all along to continue a chattel, the onus lying on those who contend that it is a chattel.'

In Reynolds v. Ashby and Son (1904) A.C. 466) Lord Lindley dealing with a case where machinery had been obtained on a hire purchase agreement from the owner and attached to a factory for the purpose of working it, observed, 'The purpose for which the machines were obtained and fixed seems to be unmistakable; it was to complete and use the buildings as a factory. It is true that the machines could be removed if necessary, but the concrete beds and bolts prepared for them negative any idea of treating the machines when fixed as moveable chattels.'

After observing that the English cases were not all reconcileable, His Lordship pointed out.

'In dealing with them (fixtures) attention must be paid not only to the nature of the thing and to the mode of attachment, but to the circumstances under which it was attached, the purpose to be served, and last but not least to the position of the rival claimants to the things in dispute.'

It will thus be seen that the degree and nature of the attachment is no doubt a consideration but only a minor consideration. The more important consideration is the object of the annexation which is a question of fact to be determined by the circumstances in each case. For instance, if a tenant for years or a tenant for life buys and fixes machinery of great value to the tenement occupied by him, it is unlikely that he would have intended to so attach the machinery as to make it part of the immoveable property. In Subramaniam Chettiar v. Chidambaram Servai (51 L.W. 155) decided by Wadsworth, J. the question was whether an oil engine which was installed by making a concrete base fitted with bolts and attaching it to the bolts by means of nuts, was moveable or immovable property. The engine was installed by a tenant of a building holding a lease for a period of three years for the generation of electricity for lighting and running a cinema. While recognising the difference between the English and the Indian law in regard to fixtures, the learned Judge expressed the opinion that there is nothing in the English cases which made them inapplicable in the determination of the test to be applied for ascertaining whether and in what circumstances moveables annexed or attached to an immoveable property became themselves immoveables. The learned Judge observed, if we may say so with respect, quite correctly that, 'If a thing is imbedded in the earth or attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached, then it is part of the immoveable property. If the attachment is merely for the beneficial enjoyment of the chattel itself, then it remains a chattel, even though fixed for the time being to that it may be enjoyed. The question must in each case be decided according to the circumstances.'

He has pointed out that when the owner of a building instals machinery therein he may well have intended to make a permanent improvement to the premises which he owned in order to facilitate the user of those premises but that a tenant in temporary occupation of leased premises is not likely to have had any such intention in making the improvement and he accordingly held that the oil engine did not become and was not therefore immoveable property. As we have already indicated, the more important test is to ascertain the intention of the persons concerned when he attaches and instals his own machinery to the land or building. The intention may be express or implied from the circumstances in which he attaches the machinery, in the absence however of proof one way or the other it seems to us that it would be proper to apply the test which the Privy Council laid down in Gokaldoss Gopaldoss v. Puranmal Premsukdoss (10 Cal. 1035 (P.C.) for ascertaining the true intention, of a purchaser of the equity of redemption when he pays off a prior mortgage and subsequently claims subrogation. Their Lordships observed, 'The obvious question to ask in the interest of justice, equity and good conscience, is, what was the intention of the party paying off the charge? He had a right to extinguish it and a right to keep it alive. What was his intention? If there is no express evidence of it, what intention should be ascribed to him? The ordinary rule is that a man having a right to act in either of two ways, shall be assumed to have acted according to his interest.'

On this principle the intention to be attributed is that of a person acting from motives of self-interest. Applying this

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test, what we find here is this. The second defendant was at the date of the dubashee agreement the owner of the factory and the owner of the bone-crushing mill located in it. It is true that before his purchase the site and the land on which the factory stood belonged to one of four partners of the firm which owned the machinery in common having installed it for the purpose of manufacturing bone-meal. It was said that until the purchase by the defendant the machinery and the land belonged to different owners and that it would never have been the intention of the partnership to treat the machinery as party of the land. While we agree that there is considerable force in this argument, we cannot assent to the proposition that when the second defendant purchased the land and the machinery he continued to have the same intention which his vendors had before him. There was no reason whatever for thinking that he intended to keep the two things apart. It is obvious that his object was to become the owner of both for the purpose of carrying on the business and for his own and individual benefit. If the argument is correct, namely that the same intention which the vendors had must be attributed to the purchaser, the only way of establishing a different intention would be by the purchaser removing the machinery from the ground to which it was annexed and again attaching it with the express intention of making it part of the land. We cannot imagine that the law requires any such procedure to be adopted for inferring an intention on the part of the purchaser to make the machinery part of the land. Taking all the circumstances of the case before us, we are of opinion that the plant and the machinery of the bone mill are immoveable property so annexed to the floor of the factory as to become part of it. It follows that the appeal must be and is accordingly allowed. The suit is dismissed as against the fifth defendant. The appellant is entitled to his costs here and in the Court below.