[Cites 21, Cited by 0]
Kerala High Court
N.K.Ramachandran vs T.B.Sunil Kumar on 19 December, 2025
2025:KER:97773
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE EASWARAN S.
FRIDAY, THE 19TH DAY OF DECEMBER 2025 / 28TH AGRAHAYANA, 1947
RSA NO. 980 OF 2013
AGAINST THE JUDGMENT AND DECREE DATED 25.06.2013 IN AS
NO.82 OF 2011 OF THE SUB COURT, PERUMBAVOOR ARISING OUT
OF THE JUDGMENT AND DECREE DATED 15.06.2011 IN OS NO.226
OF 2008 OF THE MUNSIFF COURT, PERUMBAVOOR
APPELLANTS[APPELLANTS/DEFENDANTS NOS.1 & 2]:
1 N.K.RAMACHANDRAN
AGED 58 YEARS, S/O KUNJAPPAN, NJARAKKATTU
HOUSE, VENGOLA KARA, VENGOLA VILLAGE,
KUNNATHUNADU TALUK
REPRESENTED BY HIS POWER OF ATTORNEY HOLDER
SRI KUNJAPPAN, S/O RAMAN N.K, NJARAKKATU
HOUSE, KADAYIRUPU KARA, AICKARANADU NORTH
VILLAGE
2 PANKAJAM
AGED 50 YEARS, W/O RAMACHANDRAN N.J,
NJARAKKATTU HOUSE, VENGOLA KARA, VANGOLA
VILLAGE, KUNNATHUNADU TALUK
REPRESENTED BY HIS POWER OF ATTORNEY HOLDER
SRI KUNJAPPAN, S/O RAMAN N.K, NJARAKKATU
HOUSE, KADAYIRUPU KARA, AICKARANADU NORTH
VILLAGE
BY ADV
SRI.P.THOMAS GEEVERGHESE
RESPONDENTS[RESPONDENTS/PLAINTIFF & DEFENDANTS NOS.3 &
4]:
1 T.B.SUNIL KUMAR
AGED 40 YEARS, S/O BHASKARAN PILLA,
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2
THEKKEPILLY HOUSE, ELEMBAKAPPILLY KARA,
KOOVAPPADY VILLAGE, KUNNATHUNADU TALUK,
PIN-683 544
2 N.E ABRAHAM(DIED)
AGED 78 YEARS, S/O ITHAPPIRI, NJATTUKALA
HOUSE, VALAMPURA KARA, PATTIMATTOM VILLAGE,
KUNNATHUNADU TALUK, PIN-683 548
(IT IS RECORDED THAT THE 3RD RESPONDENT IS THE
SON OF THE DECEASED 2ND RESPONDENT AS PER
ORDER DATED 13/10/2025)
3 KURIAKOSE
AGED 38 YEARS, S/O N.E ABRAHAM, NJATTUKALA
HOUSE, VALAMPUR KARA, PATTIMATTOM VILLAGE,
KUNNATHUNADU TALUK, PIN-683 548
BY ADVS.
SRI.T.KRISHNANUNNI (SR.), FOR R1
SRI.THAREEQ ANWAR K., FOR R1
SRI.K.C.KIRAN, FOR R1
SRI.JAMSHEED HAFIZ, FOR R1
G.SREEKUMAR CHELUR, FOR R2 AND R3(B/O)
THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD
ON 19.12.2025, ALONG WITH RSA.1097/2013, 1100/2013 AND
CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
2025:KER:97773
R.S.A Nos.980, 1097, 1100 and 1188 of 2013
3
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE EASWARAN S.
FRIDAY, THE 19TH DAY OF DECEMBER 2025 / 28TH AGRAHAYANA, 1947
RSA NO. 1097 OF 2013
AGAINST THE JUDGMENT AND DECREE DATED 25.06.2013 IN AS
NO.81 OF 2011 OF THE SUB COURT, PERUMBAVOOR ARISING OUT
OF THE JUDGMENT AND DECREE DATED 15.06.2011 IN OS NO.226
OF 2008 OF THE MUNSIFF COURT, PERUMBAVOOR
APPELLANTS/APPELLANTS/DEFENDANTS 3 AND 4:
1 N.E.ABRAHAM (DIED, LHR RECORDED)
AGED 80 YEARS, S/O. ITHAPPIRI, NJATTUKALA
HOUSE, VALAMPUR KARA, PATTIMATTOM VILLAGE,
KUNNATHUNADU TALUK.,
[THE 2ND APPELLANT IS RECORDED AS THE LEGAL
HEIR OF DECEASED 1ST APPELLANT , AS PER ORDER
DATED 13/10/2025 VIDE MEMO DATED 13.10.2025 IN
CONNECTED CASE RSA No.1100/13.]
2 KURIAKOSE
AGED 40 YEARS, S/O. N.E.ABRAHAM, NJATTUKALA
HOUSE, VALAMPUR KARA, PATTIMATTOM VILLAGE,
KUNNATHUNADU TALUK.
BY ADV
SHRI.G.SREEKUMAR (CHELUR)
RESPONDENTS/RESPONDENTS/PLAINTIFF AND DEFENDANTS 1 AND 2:
1 T.B.SUNILKUMAR
AGED 42 YEARS, S/O. BHASKARAN PILLAI,
THEKEPILLY HOUSE, ELAMBAKAPILLY KARA,
KOOVAPADY VILLAGE, KUNNATHUNADU TALUK-682 019.
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4
2 N.K.RAMACHANDRAN
AGED 60 YEARS, S/O. KUNJAPPAN, NJARAKATTU
HOUSE, VENGOLA KARA, VENGOLA VILLAGE,
KUNNATHUNADU TALUK,
REP.BY HIS POWER OF ATTORNEY HOLDER KUNJAPPAN,
AGED 80, S/O. RAMAN N.K., NJARAKATU HOUSE,
KADAYIRUPPU KARA, AICKARANADU NORTH VILLAGE,
PIN-682 311.
3 PANKAJAM
AGED 52 YEARS, W/O. RAMACHANDRAN N.K.,
NJARAKATTU HOUSE, VENGOLA KARA, VENGOLA
VILLAGE, KUNNATHUNADU TALUK, REP.BY HER POWER
OF ATTORNEY HOLDER KUNJAPPAN, AGED 80, S/O.
RAMAN N.K., NJARAKATU HOUSE, KADAYIRUPU KARA,
AICKARANADU NORTH VILLAGE, PIN-682 311.
BY ADVS.
SRI.T.KRISHNANUNNI (SR.), FOR R1
SRI.THAREEQ ANWAR K., FOR R1
SRI.K.C.KIRAN, FOR R1
SMT.MEENA.A., FOR R1
SMT.P.A.SHEEJA, FOR R1
SRI.P.THOMAS GEEVERGHESE, FOR R2 AND R3
THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD
ON 19.12.2025, ALONG WITH RSA.980/2013 AND CONNECTED
CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
2025:KER:97773
R.S.A Nos.980, 1097, 1100 and 1188 of 2013
5
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE EASWARAN S.
FRIDAY, THE 19TH DAY OF DECEMBER 2025 / 28TH AGRAHAYANA, 1947
RSA NO. 1100 OF 2013
AGAINST THE JUDGMENT AND DECREE DATED 25.06.2013 IN AS
NO.82 OF 2011 OF THE SUB COURT, PERUMBAVOOR ARISING OUT
OF THE JUDGMENT AND DECREE DATED 15.06.2011 IN OS NO.226
OF 2008 OF THE MUNSIFF COURT, PERUMBAVOOR
APPELLANTS/RESPONDENTS 2 AND 3/DEFENDANTS 3 AND 4:
1 N.E. ABRAHAM (DIED, LHR RECORDED)
AGED 80 YEARS, S/O. ITHAPPIRI, NJATTUKALA
HOUSE, VALAMPUR KARA, PATTIMATTOM VILLAGE,
KUNNATHUNADU TALUK.
[THE 2ND APPELLANT IS RECORDED AS THE LEGAL
HEIR OF DECEASED 1ST APPELLANT AS PER ORDER
DATED 13.10.2025 VIDE MEMO DATED 13.10.2025.]
2 KURIAKOSE
AGED 40, S/O.N.E. ABRAHAM, NJATTUKALA HOUSE,
VALAMPUR KARA, PATTIMATTOM VILLAGE,
KUNNATHUNADU TALUK.
BY ADV
SHRI.G.SREEKUMAR (CHELUR)
RESPONDENTS/FIRST RESPONDENT AND APPELLANTS 1 AND
2/PLAINTIFF AND DEFENDANTS 1 AND 2:
1 T.B. SUNIL KUMAR
AGED 42, S/O. BHASKARAN PILLAI, THEKEPILLY
HOUSE, ELAMBAKAPILLY KARA, KOOVAPADY VILLAGE,
KUNNATHUNADU TALUK - 682 544.
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6
2 N.K. RAMACHANDRAN
AGED 60, S/O. KUNJAPPAN, NJARAKATTU HOUSE,
VENGOLA KARA, VENGOLA VILLAGE, KUNNATHUNADU
TALUK, REPRESENTED BY HIS POWER OF ATTORNEY
HOLDER KUNJAPPAN, AGED 80, S/O. RAMAN N.K.,
NJARAKATU HOUSE, KADAYIRUPU KARA, AICKARANADU
NORTH VILLAGE - 682 311.
3 PANKAJAM
AGED 52, W/O. RAMACHANDRAN N.K., NJARAKATTU
HOUSE, VENGOLA KARA, VENGOLA VILLAGE,
KUNNATHUNADU TALUK, REPRESENTED BY HIS POWER
OF ATTORNEY HOLDER KUNJAPPAN, AGED 80, S/O.
RAMAN N.K., NJARAKATTU HOUSE, KADAYIRUPU KARA,
AICKARANADU NORTH VILLAGE - 682 311.
BY ADVS.
SRI.T.KRISHNANUNNI (SR.), FOR R1
SRI.THAREEQ ANWAR K., FOR R1
SRI.K.C.KIRAN, FOR R1
SMT.MEENA.A., FOR R1
SMT.P.A.SHEEJA, FOR R1
SRI.P.THOMAS GEEVERGHESE, FOR R2 AND R3
THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD
ON 19.12.2025, ALONG WITH RSA.980/2013 AND CONNECTED
CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
2025:KER:97773
R.S.A Nos.980, 1097, 1100 and 1188 of 2013
7
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE EASWARAN S.
FRIDAY, THE 19TH DAY OF DECEMBER 2025 / 28TH AGRAHAYANA, 1947
RSA NO. 1188 OF 2013
AGAINST THE JUDGMENT AND DECREE DATED 25.06.2013 IN AS
NO.81 OF 2011 OF THE SUB COURT, PERUMBAVOOR ARISING OUT
OF THE JUDGMENT AND DECREE DATED 15.06.2011 IN OS NO.226
OF 2008 OF THE MUNSIFF COURT, PERUMBAVOOR
APPELLANTS[RESPONDENTS 2 & 3/DEFENDANTS NOS.1 & 2:
1 N.K.RAMACHANDRAN
AGED 58 YEARS, S/O.KUNJAPPAN,NJARAKKATTU
HOUSE,VENGOLA KARA, VENGOLA VILLAGE,
KUNNATHUNADU TALUK,
REPRESENTED BY HIS POWER OF ATTORNEY HOLDER
SRI.KUNJAPPAN, AGED 78 YEARS, S/O.RAMAN.N.K,
NJARAKKATTU HOUSE, KADAYIRUPPU KARA,
AICKARANADU, NORTH VILLAGE.
2 PANKAJAM
AGED 50 YEARS, W/O.RAMACHANDRAN
N.K,,NJARAKKATTU HOUSE,VENGOLA KARA, VENGOLA
VILLAGE, KUNNATHUNADU TALUK,
REPRESENTED BY HIS POWER OF ATTORNEY HOLDER
SRI.KUNJAPPAN, AGED 78 YEARS, S/O.RAMAN.N.K,
NJARAKKATTU HOUSE, KADAYIRUPPU KARA,
AICKARANADU, NORTH VILLAGE.
BY ADV
SRI.P.THOMAS GEEVERGHESE
RESPONDENTS[APPELLANT NOS.1 & 2 AND 1ST
RESPONDENT/DEFENDANTS NOS.3 & 4 AND PLAINTIFF:
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8
1 N.E.ABRAHAM(DIED)
AGED 78 YEARS, S/O.ITHAPPIRI, NJATTUKALA
HOUSE, VALAMPUR KARA, PATTIMATTOM VILLAGE,
KUNNATHUNADU TALUK, PIN - 683 541
(IT IS RECORDED THAT THE 2ND RESPONDENT IS THE
SON OF THE DECEASED 1ST RESPONDENT AS PER
ORDER DATED 13/10/2025)
2 KURIAKOSE
AGED 38 YEARS
S/O.N.E.ABRAHAM,NJATTUKALA HOUSE, VALAMPUR
KARA, PATTIMATTOM VILLAGE, KUNNATHUNADU TALUK,
PIN - 683 541
3 T.B.SUNIL KUMAR
AGED 40 YEARS, S/O.BHASKARAN PILLA,THEKKEPILLY
HOUSE, ELAMBAKAPPILLY KARA, KOOVAPPADY
VILLAGE, KUNNATHUNADU TALUK, PIN - 683 544
BY ADVS.
SRI.T.KRISHNANUNNI (SR.), FOR R3
SRI.THAREEQ ANWAR K., FOR R3
SMT.MEENA.A., FOR R3
SRI.G.SREEKUMAR CHELUR, FOR R1 AND R2 (B/O)
THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD
ON 19.12.2025, ALONG WITH RSA.980/2013 AND CONNECTED
CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
2025:KER:97773
R.S.A Nos.980, 1097, 1100 and 1188 of 2013
9
"C.R"
EASWARAN S., J
--------------------------------
R.S.A No.980 of 2013,
R.S.A No.1097 of 2013,
R.S.A No.1100 of 2013,
and
R.S.A No.1188 of 2013
-------------------------------
Dated this the 19th day of December, 2025
COMMON JUDGMENT
These four appeals raise a common question and hence
being considered together and are disposed of by this common
judgment.
2. The appellants are the defendants in a suit for recovery
of possession and a permanent prohibitory injunction. The plaint
schedule property was purchased by the plaintiff by virtue of sale
deed No.2819/1998 of SRO Puthencurz. Originally the property
belonging to one Karuthedathu Yohannan, who had mortgaged the
property for receiving a chitty amount from Thrissivaperoor Social
Welfare Centre Kuri Unit, hereinafter called as the chitty
company. In 1987, the company filed a suit and obtained a decree
charged on the plaint schedule property. E.P No.271/1989 was
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filed before the Sub Court, Paravur, in which the schedule
property was auctioned and the chitty company purchased the
plaint schedule property and the sale was confirmed on
07.11.1990. Thereafter, the company obtained delivery of the
property in a fresh proceeding as E.P No.63/1991. Subsequently,
the plaint schedule property was sold to the plaintiff by the chitty
company. Later, when defendants 1 and 2 tried to trespass into
the property, plaintiff filed O.S No.298/1999 seeking injunction
restraining the defendants from trespassing into the plaint
schedule property. Finding that the plaintiff was divested of the
possession of the suit property, the said suit was withdrawn with
liberty to file a fresh suit and hence the present suit.
2.1 The defendants entered appearance and contested the
suit by contending that the plaintiff had no right title and interest
over the plaint schedule property. It was contended that the
property originally belong to Yohannan, who had sold the property
to one Suseela. In the year 1989, Suseela executed a sale deed in
respect of the property in favour of defendants 1 and 2. The 1st
defendant, in the year 1999 had executed a document in favour of
the 2nd defendant and the 2nd defendant consequently sold the
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R.S.A Nos.980, 1097, 1100 and 1188 of 2013
property to the 3 rd
defendant in the year 2005. The plaintiff
contended that the subsequent documents are no longer valid in
the eye of law.The defendants however raised the plea that as on
the date of execution of the sale deed by the company in the favour
of the plaintiff, the right title and interest over the property was
already divested in favour of Suseela and in the absence of Suseela
in the party array, the decree obtained by the chitty company is
not executable. It was further contended that going by the nature
of the document executed by Yohannan in favour of the chitty
company, the right to enforce the security arose only on the
default of the chitty amount and not from the date of execution of
the deed. The fact that OS No.298/1999 was withdrawn would
itself show that there is a cloud in the title of the plaintiff and in
the absence of any prayer for declaration of title, the suit is not
maintainable. On behalf of the plaintiff, Exts.A1 to A25 documents
were produced and PW1 and PW2 were examined. On behalf of
defendants, Exts.B1 to B21 documents were produced and DW1 to
DW3 were examined. Exts.C1 and C2 are the reports of the
Advocate Commissioner and Exts.C1(a) and C2(a) are the rough
sketch and survey plan filed by the Advocate Commissioner. The
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R.S.A Nos.980, 1097, 1100 and 1188 of 2013
trial court on appreciation of the oral and documentary evidence
came to the conclusion that in the light of Exts.A4, A5 and A6
documents, a clear case of mortgage is made out and therefore the
chitty company had a first charge over the property and
consequential sale by Yohanan, during the pendency of the
mortgage was not binding upon the chitty company.
Consequently, the plaintiff was granted a decree for recovery of
possession and injunction. Aggrieved, the defendants preferred
A.S Nos.81/2011 and 82/2011 before the Sub Court, Perumbavoor.
By judgment dated 25.06.2013, the First Appellate Court
confirmed the findings of the trial court and dismissed the suit
and hence the appeal.
3. On 10.10.2013, this Court admitted the appeal and
framed the following substantial questions of law for
considerations:-
1. Whether the property sold in execution of the decree and
the property claimed by the defendants 3 and 4 are one and
the same?
2. When the auction purchaser does not seek delivery of the
property within one year can he file a separate suit for
recovery of possession on the strength of the alleged deed
obtained in the court auction ?
3. Is there any difficulties between Mortgage and Chitty -
Hypothecation Bonds when the suit is not brought
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following the procedure under Order 34 can a property be
simply put up for sale since that property was not
attached ?
4. Heard Shri.P.Thomas Geeverghese, the learned
counsel appearing for the appellants / defendants 1 and 2 in R.S.A
Nos.980/2013 and 1188/2013, Shri.G.Sreekumar (Chelur), the
learned counsel appearing for the appellants / defendants 3 and 4
in R.S.A No.1100/2013 and 1097/2013 and Shri.T.Krishnanunni,
the learned Senior Counsel assisted by Shri.Thareeq Anwar, the
learned counsel appearing for the 1st respondent / plaintiff.
5. Shri.P.Thomas Geeverghese, the learned counsel
appearing for the appellants in R.S.A Nos.980/2013 and
1188/2013 raised the following submissions:-
(a) The execution of Exts.A4, A5 and A6 agreements by late
Yohannan in favour of the Chitty Company has no legal sanctity
inasmuch as the agreements are only a chitty hypothecation bond.
Such an agreement does not have any legal efficacy. A debt under
a chitty security bond would arise only on the date of default and
going by the averments in Ext.A9 plaint, the default occurred only
on 20.04.1985 and by that time, Yohannan had transferred the
property in favour of Suseela.
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(b) Going by the provisions contained under the Chit Funds
Act, 1982, a civil suit is barred under Section 64 of the Chit Funds
Act. The remedy of the company, if any, was to initiate arbitration
proceedings and not otherwise.
(c) Even assuming for argument sake that a suit was
maintainable inasmuch as the subsequent assignees of the
property are not made a party, the decree passed is not executable.
(d) The right of Yohannan over the property survives in the
form of equity of redemption, which has been transferred to
Suseela and later to the defendants and therefore at any rate, they
are entitled to exercise the right of equity of redemption.
(e) The nature of the chitty security bond having been clearly
explained by the Full Bench of this Court in P.K.Achuthan v.
SBT Calicut [1974 KHC 181]. Going by the decision of the
Hon'ble Supreme Court, in Shriram Chits and Investment
(P) Ltd v. Union of India and Others [1993 supp (4) SCC
226], no debtor and creditor relationship is established between a
subscriber and a chitty company in case of execution of a security
bond.
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(f) Lastly it is contended that admittedly the chitty company
was based at Bangalore and therefore they could not have filed a
suit for recovery of money at Thrissur.
6. Shri.G.Sreekumar (Chelur) the learned counsel
appearing for the appellants in R.S.A Nos.1097/2013 and
1100/2013, adopted the arguments of Shri.P.Thomas Geeverghese,
the learned counsel appearing for the appellants in R.S.A
Nos.980/2013 and 1188/2013. But however also raised the
following submissions.
a) The decree in respect of 23.47 Ares of land, is un-executable
because just before passing of the decree the schedule to the
plaint, was amended. Though the amendment was allowed, the
same was not carried forward to the decree and so much so that,
there is no decree against 23.47 Ares of land. Since, the decree is a
formal expression of the views of the court, inasmuch as there is
no decree enabling the company to put up the property for sale in
respect of the plaint schedule property, no consequences flows out
of the sale certificate.
b) It is also not clear as to whether the chitty company had
taken delivery of the property and in the absence of any delivery
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within a period of one year, no right title and interest stood
conveyed into the hands of the company and thereby the plaintiff
in the present suit also did not have a title.
c) Despite a cloud being created on the title of the plaintiff, no
declaration of title was sought for and a mere recovery of
possession will not suffice.
d) Ext.A9 suit is framed in contravention to the provisions of
Order 34 Rule 2 of the Code of Civil Procedure, and hence has no
legal efficacy and therefore the decree itself is a nullity.
e) Lastly, it is contended that despite the fact that the issue of
ouster of jurisdiction, not been raised before the courts below,
since, it is a pure question of law, it is permissible for the
appellants to raise the contentions before this Court.
7. Per contra, Shri.T.Krishnanunni, the learned Senior
Counsel appearing on behalf of the respondent / plaintiff
countered the submissions of the learned counsel for the
appellants that none of the contentions raised before this Court is
sustainable in the eye of law. The contentions of the senior
Counsel are summarized as follows.
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a) It is too late for the defendants to contended that Exts.A4, A5
and A6 did not create any interest over the property. It is further
pointed out that in the nature of contentions raised by the parties,
it is evidently clear that Exts.A4, A5 and A6 are nothing but a
security created by late Yohannan over his property and it is
nothing but a simple mortgage.
b) Exts.A4, A5 and A6 being registered documents triggers the
operation of Section 3 of the Transfer of Property Act and it
constitutes a constructive notice to the appellants.
c) By Ext.A9 plaint, Ext.A11 auction certificate and Ext.A12
delivery report, it is explicitly proved beyond doubt that the
property in question has been delivered to the chitty company and
therefore the plea that the chitty company has not taken delivery
of the property cannot be sustained. In fact, the original
defendants in the suit for recovery of money had acknowledged
the fact that the delivery of the property was given to the chitty
company. Thus, a subsequent assignee, pending a mortgage need
not be made a party by a mortgagee to recover the amount secured
by the mortgagor.
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8. I have considered the rival submissions raised across
the Bar, perused the judgments rendered by the courts below and
the records of these cases.
Whether a debtor- creditor relationship exits when a
subscriber bids a prized chit.
9. This question assumes significance in the context of
this case since the appellants assert before this court that the
plaintiff in OS No 251/1987 did not have any right to file a suit for
recovery of money. Both sides presented their own interpretation
of the Exts.A4 to A6 documents. The decision in the appeal
ultimately revolves upon the construction placed by this court to
these documents. The further question would be whether Exts.A4,
A5 and A6 constitutes a simple mortgage, or a chitty
hypothecation bond. Before going into the above question of law,
this court needs to address this issue so as to proceed further. The
learned counsel for the appellants argued that Exts.A4 to A6 is
only a security bond executed by a subscriber of a chitty, in favour
of the company conducting the 'kuri' business, no mortgage is
created, but the same becomes enforceable only on the date of
default. To support their contentions the decision of the Full
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Bench of this Court P.K.Achuthan v. SBT, Calicut [1974 KHC
181] is pressed into service. Paragraph 7 of the decision of the Full
Bench reads as under:-
7. Where a contract provides for payment of money in
instalments and contains also a stipulation that on default
being committed in paying any of the instalments the
whole sum shall become payable at once, the true test for
determining whether the said condition is in the nature of
a penalty is to find out whether the amounts referred to in
the agreement were debita in praesenti although solvenda
in futuro or whether they were to become due to the
promisee only on the respective dates when the
instalments were payable. If on a proper construction of a
contract it is found that the real agreement between the
parties was to the effect that the whole amount was on the
date of the bond a debt due but the creditor for the
convenience of the debtor allowed it to be paid by
instalments intimating that if default should be made in
the payment of any instalment he would withdraw the
concession, then the stipulation as to the whole amount of
the balance becoming payable would not be penal; if, on
the other hand, on a proper consideration of the terms of
the contract the court comes to the conclusion that the
debt itself arises or becomes due and payable by the debtor
only on the respective dates fixed for the instalments the
stipulation that on default being made in the payment of
any instalment the whole of the balance should become
due and payable would be in the nature of a penalty.
10. It is further argued that, the decision in P.K
Achuthan (supra) was affirmed by the Three Bench Decision of
the Hon'ble Supreme Court in Shriram Chits and
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Investment (P) Ltd v. Union of India and Others [1993
supp (4) SCC 226]. The relevant paragraphs relied on by the
learned counsel for the appellants are as under :
19. The question as to the nature of chit agreement came up
for consideration before a Full Bench of five Judges of the
Kerala High Court in Janardhana Mallan v. Gangadharan,
AIR 1983 Ker 178. The Full Bench there was concerned with
the chit agreement under the Kerala Chitties Act (Act 23 of
1975) where the Kerala High Court speaking through Poti,
Acting Chief Justice, took the view that on entering into the
Chitty agreement a debt is not incurred by the subscriber for
the amount of all the future instalments and in respect of
such amount there is no debtor-creditor relationship. The
chitty variola only embodies a promise to pay on future
dates. That is not a promise to repay an existing debt, but to
pay in discharge of a contractual obligation. For similar
reasons neither the prizing of the chitty nor the execution of
the security bond would give rise to a debt, for, the prize
amount is not received as a loan, but as of right by virtue
of the terms of the contract between the parties. Therefore,
no debt due to the foreman arises by reason of the receipt of
the prize amount or of the execution of the security bond for
securing future subscriptions. The Full Bench in this
decision overruled its earlier decision in the case of P. K.
Achuthan v. State Bank of Travancore, Calicut, AIR 1975 Ker
47. While rendering the decision in Janardhana Mallan
(AIR 1983 Ker 178) the Full Bench of the Kerala High Court
considered a catena of decisions starting from 1937 in the
matter of Ramanatha Ayyar v. G.G.Narayanaswami Ayyar,
AIR 1937 Mad 364. The Andhra Pradesh High Court also,
while dealing with the transaction of a chit fund
organisation, in the matter of Dhoosa Narasimloo v. Yelala
Rajanna, ILR 1958 AP 409, where the petitioner had filed a
suit in the Court of the District Judge against the
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respondents on a promissory note executed by them for the
amount they drew in a pool from a chit fund organisation
and where the District Judge had dismissed the suit for
want of a licence under S.9(2) of the Hyderabad Money
Lenders Act (Act V of 1349 F.) and on revision, the question
that came for consideration was whether the chit fund
organisation could be regarded as a moneylender within the
meaning of the said Act and whether its transactions
partake the nature of a loan. Srinivasachari, J. speaking for
the Court held that the amount drawn by a member of a chit
fund who bid at the periodical auction giving the largest
discount could not come within the definition of a loan
within the meaning of the Money Lenders Act nor could
such a transaction be regarded as a money lending
transaction and in the circumstances S.9 of the Hyderabad
Money Lenders Act (V of 1349 F) could have no application
to such a case. At page 415 of the aforesaid report it has been
observed "in our opinion there is nothing in the chit fund
transaction which could be called the business of money
lending. It is in essence an organisation for mutual benefit."
It approved the decision of the Madras High Court in
P.N.Raghavan Pattar v. S.Arumugham, (1934 (68) Mad LJ
283 : AIR 1935 Mad. 385). That was also a case of chit fund
transaction and the question for decision was whether a
provision in the bond for payment of the whole amount in
default of any one instalment was in the nature of a penalty
coming within S.74, Illustration (g) of the Contract Act. The
learned Judges ruled that a chit fund transaction was not a
case of borrowing at all and it was entirely different from a
loan transaction. The learned Judges further held that "a
loan envisages the relationship of a creditor and a debtor
insofar as the lender and the borrower are concerned. There
cannot be the relationship of a creditor and debtor between
the stake holder and a subscriber, in a chit fund transaction.
If the stake-holder advances any amount he advances only
to one of the members, the funds of the whole body of the
chit fund, as the funds belong to the whole lot of
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subscribers, the members, borrower is as much a creditor as
a debtor. The amounts are in deposit with the stake-holder
only as a trustee for the benefit of the members of the fund."
Srinivasachari, J. noticed the observations of Srinivasa
lyengar, J. in Kudkunjee Timmarsa Pai v. Kanjarpane Subba
Rao, AIR 1928 Mad 256 where Srinivasa Iyengar, J.
regarded the position of the Manager of a kuri chit as a
trustee for all the subscribers of the chit fund.
20. We were referred to the decision of this Court in
K. P. Subbarama Sastri v. K.S. Raghavan, (1987 (2) SCC
424) wherein a contract providing for payment of money in
instalments and stipulating that on default in payment of
any of the instalments all the future instalments shall be
payable at a time with interest was held not penal in nature
in the case of kuri transaction under the Kerala Chitties Act,
1975. While upholding the transaction a Bench of this Court
approved the decision of the earlier Full Bench decision of
the Kerala High Court in the case P. K. Achuthan (AIR 1975
Ker 47) wherein the Kerala High Court had upheld such a
transaction and held it to be of not a penal nature. In this
context Eradi, J. (as His Lordship then was) speaking for the
Full Bench observed that a subscriber truly and really
becomes a debtor for the prized amount paid to him. It will
be noticed that the later Full Bench decision of the Kerala
High Court in Janardhana Mallan (AIR 1983 Ker 178) was
not brought to the notice of this Court and the Court was
referred to the overruled decision of the Kerala High Court.
The fact remains that the question involved before us as to
the true nature of transaction for the purpose of finding out
of the relevant entry in the Constitution into which it may
fall, was not involved in that case.
21. It appears to us, but for the discordant note struck
by the other Full Bench of the Kerala High Court in the
aforesaid case of P. K. Achuthan (AIR 1975 Ker 47), the
consistent view of all the High Courts has been that it is not
a money lending transaction and that there is no
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relationship of debtor and creditor for the purpose of it
being treated as a money lending transaction.
11. Does Shriram Chits(supra) affirm the view of the
full bench of this court in P.K. Achuthan(supra). Read as may,
this court could not find any such proposition in Shriram Chits
(Supra), as now canvassed by the learned Counsel for the
appellants. The Supreme Court did not lay down that, in a case of
subscriber of a chit, no debtor creditor relationship is made out.
Nor did it lay down the proposition that law laid down by this
court in P.K. Achuthan (supra) is the correct view.
12. In Oriental Kuries Ltd. rep. by its Chairman
P.D.Jose v. Lissa and Others [2019 (19) SCC 732], the
Supreme Court held that when a prized subscriber is allowed to
draw the prized chit amount, it is in the nature of a loan.
Paragraph 10 of the decision reads as under :-
10. We do not agree with the view expressed by the
Division Bench. When a prized subscriber is allowed to draw
the chit amount, which is in the nature of a grant of a loan to
him from the common fund in the hands of the foreman,
with the concessional facility of effecting re-payment in
installments; this is subject to the stipulation that the
concession is liable to be withdrawn in the event of default
being committed in payment of any of the installments.
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The chit subscriber at the time of subscription, incurs a debt
which is payable in installments. If a subscriber is permitted
to withdraw the collected sum on his turn, without being
bound to pay the future installments, it would jeopardize the
interest of all other subscribers, and the entire mechanism
of the chit fund system would collapse.
13. Therefore, it is beyond cavil that in a case where a
subscriber of a chit, bids in an auction a prized chit, he is certainly
bound to repay the amount as per the contract. It is difficult to
envisage a situation to hold that in such a case no debtor - creditor
relationship is made out. Therefore, the contrary plea is only to be
rejected.
Whether Ext A4,A5 and A 6 can be construed as a simple
mortgage.
14. Both sides are at serious variance as regards the exact
nature of right which Exts.A4 to A6 document creates. The
appellants contend that the same is only a security bond and
hence the rights if any will accrue only on default. But then, it is
beyond doubt that the relationship between Yohannan and the
chit company was certainly that of a debtor- creditor relationship.
Still, it will be expedient to construe the nature of the transaction
to give a finality to the issue raised in the appeal.
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15. Pertinently, Exts.A4, A5 and A6 are not executed at the
same time when Yohannan had bid for the prized chit in auction.
The transaction is after Yohannan bidding the prized chit.
Irrespective of the nature of the relationship between Yohannan
and the chit company, as soon as Exts.A4, A5 and A6 are executed,
the relationship gets elevated by itself into a debtor and creditor
relationship, especially since he had offered his property as
security for the amount he bid in auction. Therefore the creditor,
chit company was entitled to maintain a suit purely based on
Exts.A4, A5 and A6..
16. Moreover, Exts.A4, A5 and A6 documents being
registered documents operates as a constructive notice between
the chit company qua the appellants in terms of Section 3 of the
Transfer of Property Act 1882. Therefore any subsequent
alienation by Yohannan can only be subservient to Exts.A4, A5
and A6.
17. Still further, the nature of Exts.A4, A5 and A6 cannot
be disputed by the appellants at this point of time. All the
defendants in the written statement were in unison as regards the
nature of transaction. In fact, the defendants went to the extent of
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saying that their predecessor is entitled for equity of redemption,
there by clearly admitting the fact that Exts.A4, A5 and A6 created
a mortgage. Therefore, this court is inclined to hold that Ext.A4,
Ext.A5, and Ext.A6 documents are nothing but a deed of simple
mortgage.
Applicability of Chit Funds Act 1982.
18. This question assumes significance in the context of this
case especially since the appellants contend that the plaintiff in
Ext.A9 suit by a chit company registered under the Chit Funds Act,
1982 before Bangalore and therefore, the provisions of the Act
must be applied with full vigour. The contentions as regards
applicability of the Act is multifarious.
a) the suit is barred under Section 64
b) the assignees of the property must be made a party
c) suit filed in the Sub Court, Paravoor, is not maintainable.
19. Before going into the question whether the suit is
maintainable at all or not, one needs to consider whether the Act
itself is applicable to the State of Kerala or not. Though the Act
came into force in the year 1982, it was not notified till
30.04.2012.
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20. What is the position of a chit subscribed prior to 30-4-2012
came for consideration before the Division Bench in Hi-Line
Kuries Pvt. Ltd. v. Sukheesh [2022(3) KLT 159]. It was held
that, the provisions of Section 64(1) of the Chit Funds Act have no
application to any chit started in the State of Kerala before the
commencement of the Chit Funds Act that is 30.04.2012.
21. In the light of the decision of the Division Bench, it is
concluded that the provisions of Section 64 of the Chit Funds Act
is not attracted in the present case and consequently the
jurisdiction of the Civil Court is not ousted.
Whether the subsequent assignee should be made a
party to suit by the Chit Company?.
22. The issue becomes academic in the sense that once it is
concluded that Chit Funds Act 1982 does not apply, the
consequence should follow and the appellant cannot contend that
they are necessary parties to Ext.A9 suit.
23. The issue could also be considered in the context of the
Transfer of Property Act, 1882. Once it is concluded that Exts.A4,
A5 & A6 are nothing but a simple mortgage, the further question is
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whether the mortgagee is bound by the subsequent assignment by
the mortgagor.
24. One cannot but notice the fact that 'once a mortgage is
always a mortgage' principle applies with all vigor in the facts of
the case. In terms of Section 58 of the Transfer of Property Act
1882, the mortgagee is not bound by the transfer effected by the
mortgagor and such transfer is not binding upon him unless it is
done with the junction of the mortgagee.
Whether OS No 251/1987 is properly framed or does it
offend Order 34 Rule 2 of Code of Civil Procedure, 1908.
25. On a close reading of the plaint in OS No.251 of 1987
shows that it is nothing but a suit for recovery of money charged
on the property. The charge is claimed based on Exts.A4, A5 & A6
which is an agreement creating a simple mortgage. However,
Shri.G.Sreekumar(chelur), learned counsel appearing for
appellants in R.S.A Nos.1097/2013 and 1100/2013 pointed out
that since OS No 257/1987 does not meet the requirement of
Order 34 Rule 1 of CPC, the decree passed is a nullity.
Order 34 Rule 1 CPC reads as under;
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ORDER XXXIV
SUITS RELATING TO MORTGAGES OF IMMOVABLE
PROPERTY
1. Parties to suits for foreclosure , sale and redemption-
Subject to the provisions of this Code, all parties having an
interest either in the mortgage- security or in the right of
redemption shall be joined as parties to any suit relating to the
mortgage.
Explanation- A pusine mortgagee may sue for foreclosure or
for sale without making prior mortgagee a party to the suit:
and a prior mortgagee need not be joined in a suit to redeem a
subsequent mortgagee.
26. Reliance is placed on the above provision to contend that
since the appellants are assignees pending mortgage, they ought to
have been made a party and in their absence the decree passed in
OS No 257/1987 is inexecutable.
27. This court, finds itself unable to subscribe to the above
argument for multiple reasons. The essential difference in a suit
under Order 34 Rule 1 of CPC and a suit for recovery of money
charged on the property is that no personal decree can be claimed
in a suit under Order 34 Rule 1 of CPC unless the mortgagor by
covenant binds himself to pay the mortgage money. Moreover, in
order to maintain a suit under Order 34 Rule 1 of CPC, amount
should be advanced by the mortgagee in pursuance to the
mortgage. Normally in such a case, no personal decree can be
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claimed. Whereas, in a suit for recovery of money charged on the
mortgage, the creditor is entitled to ask for a personal decree as
well as a charged decree. A perusal of Ext.A10 decree shows that
the chit company was granted a personal decree as well as a
charged decree. That apart, the larger question to be considered is
whether the mortgagee is bound by the subsequent transfer by the
mortgagor. Only if he is bound by the subsequent transfer, he need
to implead the subsequent assignee.
28. As stated above, character of Exts.A4 to A6 is nothing but
a simple mortgage governed by Section 58(a) of the Transfer of
Property Act 1882. The essential characteristic of a simple
mortgage are twofold. i) the personal obligation and ii) the
property. Thus, once a mortgage is created, the right of the
mortgagee to recover his mortgage money cannot be defeated by
the mortgagor by alienating the property. The mortgagor is thus
disabled from encumbering the property without the junction of
the mortgagee and if he does, the same is not binding on the
mortgagee and he is entitled to ignore the transfer and proceed to
enforce his mortgage in accordance with law and in which case,
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the subsequent transferee is bound by the decree passed in the suit
to enforce the mortgage.
29. Therefore, it is concluded that the OS No 257/1987 is
not hit by provisions of Order 34 Rule 1 and the decree passed in
the suit cannot be held to be a nullity and the provisions of Order
34 Rule 2 of CPC does not apply to a suit for recovery of money
charged on the mortgage.
Whether there is any executable decree in respect of
plaint schedule property.
30. Shri.G.Sreekumar (Chelur) the learned counsel for the
appellants in R.S.A Nos.1097/2013 and 1100/2013 asserted that
there is no decree against 23.47 Ares of land. According to the
learned counsel, the plaintiff in OS No.251/1987 had sought for
amendment of the plaint schedule and the same was granted.
However, when the decree was drawn, the same was not in tune
with the amended plaint schedule.
31. It is pertinent to mention that originally OS No.251/1987
contained 5 items of property. Later by filing IA No.1315/1988, the
plaintiff sought for deleting the 5th item in the plaint schedule
consisting of 35.21 Ares. It has come out in evidence that the
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plaintiff therein had released the mortgage in respect of 35.21 Ares
and hence the claim was relinquished. When the suit was decreed
on 10.06.1988, the decree was granted in respect of schedule 1 to 3
and 5 properties. While drawing up the decree, the extent of 35.21
Ares was included as 4th item. At any rate, it is beyond dispute that
the plaint schedule consisting of 23.47 Ares was included as item
no 2 in the decree schedule . Moreover, it is too late for the
appellants to raise a contention regarding the executability of the
decree in O.S No.251/1987. At any rate, going by Ext.A12 delivery
report, it is clear that, the Amin in execution of judgment and
decree in O.S No.251/1987 delivered the plaint schedule property
to the chitty company, which is endorsed by the judgment debtors.
Therefore, if as a matter of fact, the judgment debtors did not
have a case that there was no decree against the plaint schedule
property, this Court fails to comprehend as to how the said
contention could be sustained at the hands of the subsequent
assignees.
Conclusion.
32. As a result of the above discussions, this Court finds
that the substantial questions of law framed in the memorandum
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of appeal are required to be answered against the appellants as
follows:-
(a) The property sold in auction arising out of the execution
proceedings in O.S No.251/1987 and the property claimed by
defendants 3 and 4 are one the same, which is explicitly evident
from Ext.A11 auction certificate and from Ext.A12 delivery report.
(b) The auction purchaser in OS No 251/1987 had obtained
delivery of the property and Ext.A12 report shows that the
delivery of the property has been effected.
(c) O.S No.251/1987 is not a suit, which is to be brought within the
purview of Order 34 Rule 1 of the Code of Civil Procedure. Ext.A9
suit is only a suit for recovery of money charged on the mortgagee,
and therefore provisions of Order 34 is not applicable.
Consequently, finding that the appeals sans merit, the same
are dismissed. The respondents will be entitled to cost through out
the proceedings.
Sd/-
EASWARAN S.
JUDGE
AMR
