The Chief Manager vs Sardar Iron Safe Co.
2023 Latest Caselaw 5399 AP

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     THE HON'BLE SRI JUSTICE V.GOPALA KRISHNA RAO

                APPEAL SUIT NO. 181 OF 2007

JUDGMENT: -

1)     The Appeal, under Section 96 of the Code of Civil

Procedure     [for   short   'the       C.P.C.'],   is   filed   by   the

Appellant/Plaintiff challenging the Decree and Judgment,

dated 31.03.2003, in O.S. No. 30 of 2000 passed by the

learned Senior Civil Judge, Kandukur [for short 'the trial

Court']. The Respondents herein are the Defendants in the

said Suit.

2) The Appellant/Plaintiff filed the Suit praying for passing

of preliminary decree directing the Defendants to deposit the

suit amount of Rs.2,51,663/- with future interest.

3) Both the parties in the Appeal will be referred to as they

are arrayed before the trial Court.

4) The brief averments of the plaint, in O.S. No.30 of 2000,

are as under:

(i) The Plaintiff is the State Bank of India, constituted

under the Central Act 23/1955, dated 08.05.1955,

having its registered Branch Office at Kandukur Town of

Prakasam District. The 1st Defendant is proprietorship

Company, which is represented by 2nd Defendant -

Proprietor.

(ii) The 2nd Defendant approached the Appellant Bank for

financial aid to run the iron safes and iron furniture

business under the scheme of Small Business Finance

under the name and style of 1st Defendant Company at

Kandukur. Accordingly, the Appellant Bank sanctioned

a sum of Rs.2,00,000/-, which was agreed to be paid on

demand with interest @ 14% per annum with quarterly

rests.

(iii) The 2nd Defendant deposited title deed bearing

registration No. 3010 of 1995, dated 27.11.1995, on

01.08.1996 and also sent a confirmation letter on

02.08.1996 in favour of the Plaintiff Bank by creating an

equitable mortgage on the property contained in the

registered sale deed as collateral security and also

executed a demand promissory note for the said amount

of Rs.2,00,000/- on 01.08.1996 in favor of the Appellant

Bank.

(iv) The Schedule Property is a self-acquired property of the

2nd Defendant having a terraced building at 14

Ankanas.

(v) As the 2nd Defendant failed to pay the amount, even-

after repeated demands, but on considering the written

representation, dated 16.05.2000, submitted by the 2nd

Defendant requesting the Appellant Bank to facilitate

him to pay a sum of Rs.5,000/- per month commencing

from July, 2000, still the 2nd Defendant did not adhere

the promise and failed to pay any amount. Accordingly,

on 20.05.2000, the Appellant Bank issued a notice to

the Defendants demanding them to pay the amount by

May 2000, but the Defendants failed to respond to the

notice. Hence, the present Suit is filed.

5) The brief averments of the written statement, filed by

the Defendants, are as under:

(i) The Defendants while admitting applying for loan with

the Appellant Bank and availing the loan of

Rs.1,70,000/- submitted that the remaining balance

amount of Rs.30,000/-, out of the loan amount, has not

been utilized and it is with the bank. However, the

Defendants denied granting of loan on the condition of

creating equitable mortgage by deposit of title deeds.

The Defendants also denied that the stocks were

pledged.

(ii) The 2nd Defendant contended that he is an illiterate

person but learnt to sign. The authorities of the

Appellant Bank took his signatures on unfilled blank

bank documents, which were utilized by them for filing

the Suit. The Defendants further contended that they

did not agree to repay the loan with quarterly rests. The

Defendants contended that, the alleged equitable

mortgage deed and the pledge requires registration,

otherwise, the same is not valid and binding. Since, the

Suit is barred by limitation, the same may be dismissed

with costs.

6) Based on the above pleadings, the trial Court framed

the following issues:

(i) Whether the defendants have not availed the entire amount?

(ii) Whether the creation of equitable mortgage is not true?

(iii) To what relief?

7) During the course of trial in the trial Court, on behalf of

plaintiff, PW1 was examined and Ex.A1 to Ex.A10 were

marked. On behalf of defendants, DW1 was examined and no

document was marked.

8) After completion of the trial and hearing the arguments

of both sides, the trial Court dismissed the Suit vide its

Judgment, dated 31.03.2003, against which the present

appeal is preferred by the Plaintiff in the Suit questioning the

Decree and Judgment passed by the trial Court.

9) Heard Sri. Kota Venkata Rama Rao, learned Counsel for

the Appellant/Plaintiff and heard Sri. A. Lalit, Advocate, on

behalf of Sri. Turaga Sai Surya, learned Counsel for the

Respondents/Defendants.

10) Sri. Kota Venkata Rama Rao, learned Counsel for the

Appellant/Plaintiff would contend that, Ex.A3 ingredients

clearly goes to show that the same was executed in respect of

the past transaction and it does not require registration. The

learned Counsel would further contend that the decision of

Thota Venkata Narasamma Vs. S.V.M. Srinivasan1, which

was relied upon by the trial Court is not at all applicable to

the facts of the present case on hand. He would further

contend that the Suit has to be decreed.

(1996) 3 ALD 887

11) Per contra, the learned Counsel for the

Respondents/Defendants would contend that the trial Court

on considering the entire material on record has rightly

dismissed the Suit and there are no merits in the present

appeal.

12) Having regard to the pleadings in the Suit and the

finding recorded by the trial Court and in the light of rival

contentions and submissions made on either side before this

court, the following points would arise for determination:

(i) Whether the Ex.A3 - memorandum of deposit of title deed is compulsorily registrable document, or not?

(ii) Whether the Plaintiff Bank is entitled to Suit claim as prayed in the plaint and whether the Decree and Judgment of the trial Court needs any interference?

13) Point Nos. (i) and (ii): The case of the

Appellant/Plaintiff Bank is that the 2nd Defendant, who is the

Proprietor of the 1st Defendant, approached the Plaintiff Bank

for obtaining a loan of Rs.2,00,000/- for running a small-

scale industry. Accordingly, the Plaintiff Bank sanctioned

loan of Rs.2,00,000/- on 01.08.1996 and on the same day the

2nd Defendant deposited his title deeds and so also executed

Ex.A1 - letter of terms and conditions, Ex.A2 - registered title

deeds of the 2nd Defendant and also Ex.A4 - demand

promissory note executed by the 2nd Defendant for

Rs.2,00,000/- and Ex.A5 - demand promissory note delivery

letter and also Ex.A6 - an agreement of hypothecation in

favour of the Plaintiff Bank and availed the said loan and on

02.08.1996 the 2nd Defendant sent a letter evidencing deposit

of title deeds [Ex.A2] on 01.08.1996 and after availing loan,

the 2nd Defendant, who is the Proprietor of the 1st Defendant,

failed to discharge the loan amount to the Plaintiff Bank.

14) As seen from the judgment of the trial Court, the trial

Court came to a conclusion that Ex.A3 - memorandum of

deposit of title deeds is a compulsorily registrable document

and since Ex.A3 is not a registered document, therefore, the

Suit is liable to be dismissed.

15) The paramount question that falls for adjudication, in

this appeal, is whether the Ex.A3 is compulsorily registrable

document?

16) As seen from the recitals of Ex.A3 - inland letter, it is

clear that the same was sent to the Plaintiff Bank through

registered post on 02.08.1996. The recitals in the said Ex.A3

is hereunder:

"Dear Sir,

I am writing this to confirm that I have deposited with you on 01.08.1996 title deeds relating to my property at Kandakur described below. [hereinafter referred to as the 'said property'] with the intention of creating an equitable mortgage on the said property by way of collateral security for amounts due to the Bank from me/the concern of M/s.Sardar Iron Safe Company under the credit facility of Rs.2,00,000/- availed by me".

17) Ex.A3 is the inland letter addressed to the Chief

Manager of State Bank of India through registered post.

Ex.A3 goes to show that it was posted in a post office through

registered post; postal stamp is also visible. Ex.A3 goes to

show that the debtor deposited title deed of his property one

day prior to the date of Ex.A3 with the creditor with an intent

to create a 'security'. The law implies that, it is only a contract

between the parties to create a mortgage and, therefore, it

does not require registration.

18) The law is well settled by Apex Court [4 Judges Bench]

in a case of United Bank of India Limited Appellant Vs.

Messrs Lekharam Sonaram and Co. and others

Respondents2 that "the parties did not intend to create a

charge by the execution of the document, but merely to record a

transaction which had already been concluded and under

which rights and liabilities had already been created and the

document did not require registration."

19) In the aforesaid decision, the Apex Court [4 Judges

Bench] held in paragraph No. 8 as under:

"Applying the principle to the present case, we consider that the letter at exhibit 7(a) was not meant to

AIR 1965 Supreme Court 1591

be an integral part of the transaction between the parties. The letter does not mention what was the principal amount borrowed or to be borrowed. Neither does it refer to rate of interest for the loan. It is important to notice that the letter does not mention details of title deeds which are to be deposited with the plaintiff-bank. We are, therefore, of the opinion that the view of the High Court with regard to the construction of exhibit 7(a) is erroneous and the document was not intended to be an integral part of the transaction and did not, by itself, operate to create an interest in the immovable property. It follows, therefore, that the document-exhibit 7(a) - did not require registration under Section 17 of the Indian Registration Act."

20) The ratio laid down in the above judgment of Apex

Court squarely applies to the present facts of the case. In the

instant case also Ex.A3 goes to show that the title deed was

deposited by the debtor one day prior to Ex.A3 with the bank

and Ex.A3 does not contain what was the principal amount

borrowed or to be borrowed nor it referred to rate-of-interest

for loan. Ex.A3 letter was sent to record transaction, which

has already been concluded and under which rights and

liabilities had already been created, therefore, it did not

require registration.

21) A Division Bench of this Court in a case of Durga

Emporium, Vijayawada and Others Vs. Munaga Brothers,

rep. by Munaga Subbarao, Cuddapah and another3 held

that "letter written by mortgager to mortgagee does not by itself

create any mortgage except evidencing the factum of deposit of

title deed already taken place with a creditor, as such it does

not require registration."

22) As stated supra, in the instant case also Ex.A3, dated

02.08.1996, goes to show that the title deed relating to

property, as a debtor, was deposited on 01.08.1996 itself;

Ex.A3 is only a letter evidencing factum of deposit of

document, which has already taken place. Therefore, the ratio

laid down in the aforesaid decisions are squarely applicable to

the present case on hand. Thus, the trial Court erroneously

came to a conclusion by applying the decision of a Single

2002 (5) ALT 650 (D.B.)

Judge of this Court in Thota Venkata Narasamma [cited 1st

supra] that "Ex.A3 is not a valid document, which require

registration."

23) As stated supra, the ratio laid down by the Apex Court

[4 Judges Bench] in United Bank of India Limited [cited 2nd

supra] and in the Durga Emporium [cited 3rd supra] would

squarely applicable to the present facts of the case. Therefore,

the said finding of the trial Court is contrary to law and it is

liable to be set-aside.

24) In order to prove the case of the Plaintiff, the Plaintiff

Bank relied on the evidence of its Manager, who was

examined as PW1. As per the evidence of PW1, the 2nd

Defendant, who is the Proprietor of the 1st Defendant,

approached the Plaintiff Bank for running business of iron

safe and furniture and also availed loan on 01.08.1996 by

executing Ex.A1, Ex.A2, Ex.A4 to Ex.A6. His evidence further

goes to show that the 2nd Defendant deposited title deed on

the same day itself and he sent a letter under Ex.A3 by

evidencing the fact of deposit of title deeds deposited on

01.08.1996. The evidence of PW1 further goes to show that

the 2nd Defendant executed a revival letter under Ex.A7 and

subsequently failed to discharge his liability to the Plaintiff

Bank. The evidence of PW1 coupled with Ex.A9 [notice] clearly

goes to show that after issuance of demand notice by the

Plaintiff Bank, the Defendants failed to discharge their debt.

Ex.A10 - account copy furnished by the Plaintiff Bank clearly

goes to show that the liability of the Defendants to discharge

the debt to the Plaintiff Bank. Though the PW1 was cross-

examined by the Defendants Counsel, nothing was elicited

from PW1 to discredit his testimony in the evidence of his

cross-examination. In cross-examination, the evidence of PW1

is not disturbed on the material aspects of the case.

25) The 2nd Defendant examined himself as DW1 by way of

defense. As per his evidence also, he applied loan of

Rs.2,00,000/- with the Plaintiff Bank and the same was

sanctioned by the Plaintiff Bank. He also admitted about the

execution of promissory note and also documents on the

same day and he also admitted the execution of Ex.A3 and

Ex.A4, and the borrowing of amount from the Plaintiff Bank

by the Defendants is not at all disputed by the Defendants.

26) The learned Counsel for the Respondents/Defendants

would submit that, though the Defendants availed a loan of

Rs.2,00,000/-, the 2nd Defendant has withdrawn

Rs.1,70,000/- only from the Plaintiff Bank. The 1st Defendant

is a small-scale industry and the 2nd Defendant is the

Proprietor of the 1st Defendant Company. As per the sole

testimony of the 2nd Defendant, they availed a loan of

Rs.2,00,000/- from the Plaintiff Bank. The availing of loan of

Rs.2,00,000/- is not at all disputed by the Defendants.

Furthermore, Ex.A8 - notice was sent to the Plaintiff Bank by

the Defendants with a request to grant installments @

Rs.5,000/- per month, since he is suffering from financial

crisis in his business. DW1 admitted in Ex.A8 - notice about

the availing loan of Rs.2,00,000/- from the Plaintiff Bank.

Though DW1 was cross-examined, Ex.A8 is not at all denied

by the Defendants. In Ex.A8, there was a clear recital by the

2nd Defendant about creating equitable mortgage of his house

property. He further admits in Ex.A8 that the 2nd Defendant

by creating equitable mortgage of his house property availed

loan of Rs.2,00,000/- for his business purpose and he is

presently suffering losses in his business.

27) The learned Counsel for the Respondents/Defendants

would submit that the Defendants availed only Rs.1,70,000/-

and Rs.30,000/- was not withdrawn from out of his loan

account. As stated supra, in Ex.A8 - the 2nd Defendant

himself admitted about the availing of loan of Rs.2,00,000/-.

Moreover, Ex.A10 - account copy of the Plaintiff Bank shows

about the liability of the Defendants. Ex.A10 is not at all

disputed by the Defendants in cross-examination of PW1. No

suggestion was given to PW1 - the Manager of the Plaintiff

Bank by the Defendants Counsel that the entries in Ex.A10

are not at all correct. Ex.A1, Ex.A4 and Ex.A5 goes to show

that on 01.08.1996 the Defendants availed a loan of

Rs.2,00,000/- from the Plaintiff Bank. Ex.A7 goes to show

that a revival letter was executed by the Defendants and the

Suit is filed in the year 2000 itself. Therefore, the Suit is filed

within a period of limitation. Moreover, the signatures on

Ex.A1 and Ex.A3 are not at all disputed by the Defendants.

The bald allegation made by the Defendants is that the

signatures of the 2nd Defendant is obtained by the Plaintiff

Bank on the same day, but in order to prove the same, no

defense evidence is adduced by the Defendants except sole

testimony of the 2nd Defendant as 'DW1'.

28) Having regard to the facts and circumstances and for

the foregoing reasons, the Plaintiff Bank proved the Suit claim

and, therefore, the Judgment and Decree passed by the trial

Court is liable to be set-aside.

29) In the result, the Appeal is allowed, the Decree and

Judgment passed by the Senior Civil Judge, Kandukur, in

O.S. No. 30 of 2000 is liable to be set-aside. Resultantly,

O.S. No. 30 of 2000 on the file of Senior Civil Judge,

Kandukur, is preliminary decreed with costs for an amount of

Rs.2,51,663/- with subsequent interest @ 12% per annum on

Rs.2,00,000/- from the date of Suit till the date of Decree,

thereafter @ 6% per annum on Rs.2,00,000/- till the date of

realization. The time for redemption is three [03] months.

Both parties shall bear their own costs in the appeal.

30) As a sequel, miscellaneous petitions, if any, pending in

the Appeal shall stand closed.

_____________________________ V.GOPALA KRISHNA RAO, J Date: 09.11.2023 Sm

THE HON'BLE SRI JUSTICE V.GOPALA KRISHNA RAO

APPEAL SUIT NO. 181 OF 2007

Date: 09.11.2023

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