The Jammu & Kashmir Bank Ltd vs M/S Mayur Exports & Anr
2017 Latest Caselaw 297 Del

           *IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                      Date of decision: 17th January, 2017

+                               CS(OS) 723/1986
       THE JAMMU & KASHMIR BANK LTD.                ..... Plaintiff
                   Through: Mr. Dilip Pandita, Adv.
                                Versus
       M/S MAYUR EXPORTS & ANR                              ..... Defendants
                   Through: None.

          CORAM:-
          HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

IA No.7177/2013 (of plaintiff u/O XXXIV R-3(2)&(3) CPC)

1.

In this mortgage suit under Order XXXIV of Code of Civil Procedure, 1908 (CPC) for recovery of Rs.7,03,500/- with future interest @ 17% per annum compounded quarterly from the date of institution of the suit till realisation and for sale of the hypothecated and mortgaged properties for realisation of the said amounts, on 26th April, 2001, a preliminary decree in the sum of Rs.7,03,500/- along with interest @ 12.5% per annum with costs was passed and the defendants were directed to pay into the Court the decretal amount within six months therefrom. It was further provided that if no payment is made, the plaintiff Bank would be entitled to seek a final decree.

2. The defendants M/s Mayur Exports and Shri Anil Kumar Sethi though had contested the suit by filing a written statement but the judgment dated 26th April, 2001 records that the defendants stopped appearing at the stage of

evidence and neither cross-examined the witnesses of the plaintiff Bank nor led evidence of their own. Hence, the preliminary decree aforesaid was an ex-parte decree.

3. No monies as decreed were deposited by the defendants in the Court within six months of the decree dated 26th April, 2001 or thereafter.

4. Notwithstanding the same, the plaintiff Bank also did not apply seeking final decree and filed this application only on 22nd April, 2013.

5. The application came up before this Court first on 2nd May, 2013. In the order dated 20th May, 2013, it was observed that the application "apparently, is not within time". The plaintiff Bank thereafter filed IA No.15373/2013 under Section 5 of the Limitation Act, 1963 for condonation of the delay in applying for final decree, though pleading that Order XXXIV of CPC nowhere provides the period for applying for final decree. The said application under Section 5 of the Limitation Act came up before the Court first on 24th September, 2013 when the same was dismissed as withdrawn.

6. This application was dismissed in default of appearance of the plaintiff Bank on 20th February, 2014 but was, on application of the plaintiff Bank, on 15th July, 2014 restored.

7. The application was thereafter adjourned from time to time.

8. On 29th February, 2016, finding that notice even of the application had not been issued to the defendants, notice was ordered to be issued.

9. Notices issued to both the defendants were returned unserved with the endorsement that the defendants have shifted from the address given. On 8th August, 2016, fresh notice was ordered to be issued to the defendants. The plaintiff Bank however has not taken any steps therefor.

10. I have considered the application.

11. The plaintiff Bank has filed this application under Order XXXIV Rule 3(2)&(3) of CPC. Rule 3 of Order XXXIV of CPC provides for final decree "in foreclosure suit". The plaintiff Bank in the plaint is found to have titled the suit as a "mortgage suit" "under Order XXXIV of CPC" and not specified whether it is a suit for foreclosure of the mortgage or for sale of the mortgaged properties. In para 32 of the plaint however the particulars of hypothecation and mortgage are given as under:

"4. Property subject to : Fabrics and Raw-materials, semi-

              hypothecation              finished and finished goods in the
                                         nature of garments and brass

                                         handicrafts, office equipments,

                                         swing machines, stock-in-trade etc.

       5.     Property subject to       : Land measuring 1008 sq. yrds. out

              mortgage                   of Khasra No.96/68 situated in the

                                         area and revenue estate of Village

                                         Holambi Kalan, Delhi State."

12. The plaintiff Bank, in the prayer paragraph of the plaint, besides seeking a decree for recovery of monies due has sought "a decree for sale of the hypothecated properties and the mortgaged property (described hereinabove) .... and sale proceed thereof be ordered to be paid to the plaintiff Bank and in case of any short-fall after adjustment of the sale proceed, the balance if any, due under the decree be got realised and recovered from other properties both movable and immovable of the defendants". Therefrom, it is borne out that this suit is a suit for sale of mortgaged property and not a suit for foreclosure. Thus, the filing of the application under Order XXXIV Rule 3(2)&(3) of CPC applicable to foreclosure suits is erroneous.

13. Order XXXIV Rule 4 CPC provides for a preliminary decree in a suit for sale and Order XXXIV Rule 5 CPC provides for a final decree in a suit for sale.

14. The questions which arise are, A) whether service of notice of this application on the defendants is mandatory; and, B) whether the long delay by the plaintiff Bank in filing this application seeking final decree deprives the plaintiff Bank to a final decree.

15. The defendants were ex-parte as aforesaid at the stage of passing of the preliminary decree also and it appears that the defendants cannot be served by ordinary means. If service of notice of this application on the defendants is mandatory in law, the defendants will have to be served by publication.

16. Neither Order XXXIV Rule 5 CPC nor any other provision is found to be providing for service of notice of this application on the defendants. I however find it having been held in Abdul Hai Vs. Rahatullah Mian AIR 1974 Pat 244, Nandlal Bhagirath Kanoria Vs. National Industrial Development Corporation AIR 1998 MP 236, Bhojai Vs. Salim Ullah AIR 1967 All 221, Suresh Chandra Banerjee Vs. United Bank of India Ltd. AIR 1961 Cal 534 (DB), Mahajan Raghubir Prasad Vs. Pyarelal Amar Chand Kalars MANU/NA/0022/1943, Tikaram Namaji Vs. Tarachand Gujoba AIR 1954 Nag 135 (DB) and Muchi Dola Behara Vs. Jujisti Jami AIR 1935 Mad 716 (DB) that though Order XXXIV Rule 5 CPC does not expressly require any notice to be issued to the judgment debtor before passing of a final decree but as a matter of practice such notice should generally be given on the principle that a party should be heard before any order is passed against it. Non service of such notice, even where the preliminary decree has been passed ex parte, has been held to be a ground for setting aside thereof.

17. There is similarly no provision in Order XXXIV Rule 5 CPC or in any other provision of CPC limiting time for applying for final decree for sale. I have however wondered whether Article 137 of the Schedule to the Limitation Act, providing limitation of three years commencing from the date when the right to apply accrues, for "any other application for which no period of limitation is provided elsewhere in this division" would apply. If it were to apply, the right to apply for final decree accrued to the plaintiff Bank on expiry of six months from preliminary decree i.e. on 27 th October, 2001 and this application filed on 22nd April, 2013 is much after the period of

limitation of three years and this application would be liable to be dismissed on this ground alone.

18. The language of Order XXXIV Rule 5(3) "Where payment in accordance with sub-rule (1) has not been made, the Court shall, on application made by the plaintiff in this behalf, pass a final decree directing that the mortgaged property or a sufficient part thereof be sold, and that the proceeds of the sale be dealt within the manner provided in sub-rule (1) of Rule 4" requires an application to be filed for final decree and once it so required, the Court, in the absence of an application made by the defendant, cannot pass a final decree. Once an application for final decree is statutorily requisite, I am unable to think of any reason whatsoever as to why Article 137 of the Schedule to the Limitation Act would not apply to an application, after the passing of a preliminary decree in a mortgage suit, for a final decree. An application for final decree is an "application" within the definition of application in Section 2(b) of Limitation Act which defines it as inclusive of a petition. Section 3(1) of the Limitation Act provides that every suit instituted, appeal preferred and application made after the prescribed period shall be dismissed although limitation has not been set up as a defence. Section 3(2)(c) provides that an application by notice of motion in a High Court is made when the application is presented to the proper officer of that Court. The period of limitation provided in Article 137 should thus be applicable to an application for final decree.

19. The only reason I can think of for holding Article 137 to be not applicable to an application for final decree in a mortgage suit can be that

the limitation for instituting a suit for mortgage having been provided, if the suit is instituted within the said period of limitation and a preliminary decree is passed therein, the plaintiff cannot be non-suited for the delay in applying for a final decree.

20. I find a Single Judge of the High Court of Madras in Sivan Pillai Vs. Anbayyan 1976 (1) Madras Law Journal 385 to have indeed, after noticing Article 137 and after noticing that the same applies to an application for final decree, to have observed i) that Article 137 is a residuary Article not specifically dealing with an application for the passing of a final decree in a mortgage suit and it is by interpretation of Courts that this Article has been held to apply to an application for the passing of a final decree; ii) that it is too late in the day for questioning the correctness of the view that Article 137 applies to such an application, though a particular feature peculiar to mortgage suits had not been noticed in the past; iii) a mortgage suit does not terminate on the passing of the preliminary decree but terminates only on the passing of the final decree; iv) if the plaintiff does not apply for a final decree or applies beyond the period of limitation prescribed in Article 137, the preliminary decree would still stand; v) moreover after the preliminary decree, the suit remains pending till a final decree is actually passed and the Code does not confer a power on the Court to dismiss the suit on the ground that nobody has applied for passing of the final decree; vi) this leads to a peculiar and nebulous position of the suit being still pending and the preliminary decree already passed not having been cancelled but at the same time the decree-holder in the suit being not able to realize the fruits of the decree which he obtained under the preliminary decree. However, after

observing so, a final decree was passed inspite of having been applied for beyond the prescribed time, for the reason of the preliminary decree being defective and having not fixed any time for the judgment-debtor to make payment and on non-payment within which time the decree-holder could apply for final decree.

21. I am unable to concur with the observations aforesaid of the Single Judge of the High Court of Madras. The said observations were premised on the anomalous situation which would result on the application for final decree becoming time barred. However in my view there is no such anomaly. Once the application for final decree has not been filed within the prescribed time, the judgment-debtor / mortgagor would be entitled to treat the property mortgaged as free of mortgage. It would be a position akin to execution of a decree becoming time barred, in which case also though the decree stands but is inexecutable.

22. On the contrary, I feel that to hold that the property would remain mortgaged for an indefinite time inspite of failure of the plaintiff mortgagee to apply for a final decree would lead to an anomalous situation. A title in immovable property cannot be permitted to indefinitely remain in a state of flux and the spirit of the law of limitation is also that there should be certainty of rights and title. The Limitation Act has been enacted to consolidate and amend the law of limitation not only of suits but also of other proceedings and for purposes connected therewith. To hold that there is no limitation for filing an application for final decree would result in the property remaining mortgaged forever inspite of the mortgagee, after

obtaining preliminary decree and notwithstanding the mortgagor not depositing the decretal amount, having not applied for final decree for sale of mortgaged property. The law of limitation, which per Section 27 of the Limitation Act extinguishes rights to property on determination of the period limited thereby for taking action, does not permit such a situation.

23. I may in this regard notice that the Supreme court in Dr. Chiranji Lal Vs. Hari Das (2005) 10 SCC 746, with respect to a decree for partition of an immovable property by metes and bounds, also held that if an application for its execution is not filed within the prescribed time, it is inexecutable. It was held that rules of limitation are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. Noticing that there is no statutory provision prescribing a time limit for furnishing of the stamp paper for engrossing the decree or time limit for engrossment of the decree on stamp paper and there is no statutory obligation on the Court passing the decree to direct the parties to furnish the stamp paper for engrossing the decree, it was held that it does not mean that the party can furnish stamp paper at its sweet will and claim that the period of limitation would start only thereafter as and when decree is engrossed thereon. Similarly here, merely because Order XXXIV does not prescribe time for making an application for final decree or for cancellation of preliminary decree on such application having not been filed, cannot be held to mean that the plaintiff / mortgagee can apply for final decree at its sweet will.

24. Else, I find the Supreme Court in Sudesh Vithal Hanamsheth Vs. Sadanand Shivrao Koppal (1998) 8 SCC 591 to have, though in the context

of a suit for redemption of mortgage, proceeded on the premise that Article 137 of the Limitation Act applies to an application for preparation of a final decree. However finding that the preliminary decree in that case also had not been prepared in the form required, the period of limitation prescribed in Article 137 was held not to have commenced running. Similarly, in Monotosh Kumar Mitra Vs. Amrendranath Shah (2000) 2 SCC 672, the Supreme Court considered the application for condonation of delay in applying for a final decree in a mortgage suit on the premise that Article 137 applies. I must however acknowledge that the question does not appear to have been directly raised in either of the said two judgments. To the same effect is Sri Veera Hanuman Rice & Flour Mill Vs. State Bank of India (2000) 5 SCC 248.

25. In K. Parmeswaran Pillai Vs. K. Sumathi (1993) 4 SCC 431, also in the context of a suit for redemption of mortgage, it was held that though the period of 3 years provided under Article 137 of the Schedule to the Limitation Act starts running from the date of expiry of period fixed in preliminary decree but in the case of preliminary decree for redemption of usufructuary mortgage, no limitation begins to run until deposit is made though there is a conditional preliminary decree and default was committed by the mortgagor in compliance therefor. The reason of the mortgagee being in possession/enjoyment of the property and being not disabled by preliminary decree was given for carving out a distinction in the context of usufructuary mortgage.

26. However otherwise I find consistency of view of the various High Courts to the effect that Article 137 applies to an application for final decree. Reference in this regard can be made to Baljit Singh Vs. J.I. Cunnington AIR 1984 All 209, Smt. Amiya Debi Vs. Ranendra Narayan Saha AIR 1983 Cal 24, Raghunath & Sons Pvt. Ltd. Vs. Bijoy K. Goenka MANU/WB/0438/1994, State Bank of Hyderabad Vs. Y. Venkat Reddy 2002 (1) Andhra Pradesh Law Time 391 and S. Veluchamy Nadar Vs. Diravia Nadar 1991 (1) Madras Law Weekly 502. Reference may also be made of R. Vijayakumar Vs. The Official Liquidator of RBF Nidhi Ltd. MANU/TN/4127/2011(DB).

27. As far as this Court is concerned, in Punjab and Sind Bank Vs. Guru Nanak Auto Supplies (India) MANU/DE/0102/1997 though the application for condonation of delay in applying for a final decree was for consideration but the preliminary decree was set aside on other grounds.

28. The question thus does not appear to be res integra. Even othersie I am of the view that Article 137 applies to an application for final decree.

29. The only argument of the counsel for the plaintiff Bank may also be noticed. It was his contention that Article 66 of the Limitation Act providing for a period of 12 years "for a suit for possession of immovable property when the plaintiff has become entitled to possession by reason of any forfeiture or breach of condition" commencing from the date when the forfeiture is incurred or the condition is broken, would apply. It was argued that the application has been filed within 12 years of the expiry of the period of six months from the preliminary decree.

30. However the counsel forgets that Article 66 is for a suit and the plaintiff Bank has not filed a suit but an application for final decree. The defendant / judgment-debtor, by not depositing the decretal amount within the time provided in the preliminary decree, has not made the plaintiff Bank entitled to possession of immovable property. The application also of the plaintiff is for sale of the property and not for possession of the property.

31. The application of the plaintiff Bank for final decree is thus found to be barred by time and has to be dismissed.

32. I am conscious that the plaintiff is a bank and public monies are involved. However the plaintiff Bank has not applied for condonation of delay; though it earlier filed an application therefor but withdrew the same.

33. Once the application is found to be barred by time, the question whether notice thereof should be issued, pales into insignificance.

34. The application is dismissed as barred by time.

CS(OS) No.723/1986

35. The application for making final decree having been dismissed, the suit is disposed of.

No costs.

RAJIV SAHAI ENDLAW, J.

JANUARY 17, 2017 Bs/gsr