Madras High Court
Lakshmi Ammal ... 3Rd Defendant/ vs The Catholic Syrian Bank Ltd on 26 April, 2021
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Dated : 26.04.2021
CORAM
THE HONOURABLE MR.JUSTICE G.R.SWAMINATHAN
SA(MD)No.579 of 2011
and
MP(MD)No.1 of 2011
Lakshmi Ammal ... 3rd defendant/appellant/respondent
Vs.
1.The Catholic Syrian Bank Ltd.,
rep.by through its President,
Branch Manager and Principal Officer,
Sri.Choko George Veerampully Office
at No.94, West Masi Street,
Madurai – 1. ...Plaintiff/1st respondent/appellant
2.M/s.Prakash Wines,
Rep.by its Proprietor,
A.Suresh Babu
3.A.P.Arunachalam ...Defendants 1 & 2, Respondents 2 & 3 /
Respondents 1 & 2
(R2 & R3 are given up. Memo recorded
USR No.2383 of 2012, dated 25.07.2012
vide order dated 01.08.2012 made in
SA(MD)No.579 of 2011)
1/13
https://www.mhc.tn.gov.in/judis/
Prayer: Second Appeal is filed under Section 100 of Civil Procedure
Code, against the judgment and decree dated 03.01.2005 made in A.S
No.177 of 2004 on the file of the Principal District Court, Madurai
reversing the judgment and decree dated 01.03.2004 made in O.S No.
590 of 1993 on the file of the I Additional Sub Court, Madurai.
For Appellant : Mr.G.S.Asok Adithyan
For Respondent : Mr.R.Pandivel for R1
JUDGEMENT
The third defendant in O.S No.590 of 1993 on the file of the I
Additional Sub Court, Madurai is the appellant in this second appeal
while Catholic Syrian Bank Ltd., is the plaintiff in the suit. The case of
the plaintiff is that the first defendant Prakash Wines represented by its
Proprietor Suresh Babu applied for loan to the plaintiff bank. The
plaintiff bank agreed to grant over draft account facility to the limit of
one lakh. The first defendant executed a hypothecation deed
hypothecating the goods in favour of the plaintiff bank on the same
date. The second defendant A.P.Arunachalam stood as the guarantor
for the transaction. Ex.A1 dated 22.07.1989 pro note was executed in
favour of the second defendant A.P.Arunasalam who in turn made it
over by making an endorsement in favour of the bank.
A.P.Arunachalam had already availed loan from the bank and he had
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mortgaged the suit property in favour of the bank. He had also
deposited the original title deeds with the bank. The second defendant
executed Ex.A7 22.07.1989 in favour of the bank stating that the title
deeds deposited in respect of the account of Aruna Wines may be taken
as deposited for the equitable mortgage for the said transaction also.
The second defendant executed a renewal letter on 28.01.1992 vide
Ex.A10. Since the suit account remained unsettled, the bank issued
Ex.A8 notice dated 02.09.1992. Ex.A9 reply was received on
07.09.1992. Since the demand set out in the notice was not complied
with, the respondent bank filed O.S No.590 of 1993 for directing the
defendants (borrower and guarantor) to pay the principal sum of Rs.
1,48,868.30/- with interest and in the event of failure to do so, the
court was requested to pass the preliminary decree for sale of the
mortgaged property. But then, it turned out that the appellant
Lakshmi Ammal had exchanged the mortgaged property vide Ex.B3
dated 04.12.1991. Therefore, the appellant was impleaded by filing I.A
No.22 of 1996 as the third defendant vide order dated 08.01.1996. The
principal borrower as well as the guarantor namely, Prakash Wines and
A.P.Arunachalam remained exparte. The appellant filed written
statement raising very many legal grounds. Based on the same, the
trial court framed the necessary issues. One of the issues framed by
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the trial court was whether the suit was liable to be dismissed for
breach of Section 67 A of the Transfer of Property Act, 1882. The bank
official was examined as PW.1 and Exs.A1 to A11 were marked. On the
side of the defendant, a witness was examined. Exs.B1 to B4 were also
marked.
2.The learned Trial Judge noted that A.P.Arunachalam had
executed two deeds of mortgage in favour of the plaintiff bank. Section
67 A of the Transfer of Property Act, 1882 mandates that if a
mortgagee holds two or more mortgages executed by the same
mortgagor in the absence of a contract to the contrary, he is obliged to
sue on all the mortgages in respect of which the mortgage-money has
become due. The trial court noted that apart from the present suit,
namely, O.S No.590 of 1993, the bank had also filed O.S No.784 of
1993. In the said O.S No.784 of 1993, A.P.Arunachalam figured as the
proprietor of Aruna Wines as the first defendant. The trial court came
to the conclusion that filing of two separate suits even though the
mortgaged property as well as the mortgagor were one was improper
and dismissed the suit by judgment and decree dated 01.03.2004.
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3.Aggrieved by the same, the plaintiff bank filed A.S No.177 of
2004 before the Principal District Judge, Madurai. The first appellate
court came to the conclusion that failure to follow the procedure
contemplated under Section 67 A of the Transfer of Property Act, 1882
cannot result in the penal consequence as envisaged by the trial court.
In that view of the matter, the judgment and decree passed by the trial
court was set aside and by judgment and decree dated 03.01.2005, the
appeal was allowed and preliminary decree was passed as prayed for.
Questioning the same, this second appeal came to be filed. The second
appeal was admitted on the following substantial questions of law.
“1.Whether the suits in O.S No.590 of 1993 and 784 of
1993 filed by the first respondent herein are hit by Section
67-A of the Transfer of Property Act especially when the
appellant has raised objections in both the suits for filing two
separate suits in respect of alleged two different mortgages
with regard to the property ?
2.Can a mortgage by deposit of title deeds be created
by delivering xerox copies of the original documents of title
deeds pertaining to the immovable property ?
3.Whether the judgment of the lower appellate court is
in accordance with the mandatory requirements under Order
41 Rule 31 of Code of Civil Procedure Code ? and
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4.Has not the lower appellate court erred in law in not
considering that the 3rd respondent who exchanged the suit
property in favour of the appellant, has to be discharged from
his liability as a guarantor since the 2nd respondent himself
executed Ex.A10 without knowledge of the 3rd respondent
acknowledging his debts of his own ?”
4.The foremost contention advanced by the learned counsel
appearing for the appellant was that the trial court was justified in
invoking Section 67 A of the Transfer of Property Act, 1882 for non-
suiting the plaintiff bank. He would draw inspiration from Order 2 Rule
2 of CPC. The very purpose and object of Section 67 A of the Transfer
of Property Act, 1882, was to consolidate all the mortgages in a single
proceeding. Law always disfavors multiplicity of proceedings. In the
case on hand, the bank had not obtained leave for filing the present
suit on the strength of Ex.A1 alone. His further contention is that the
suit had been laid on the strength of Ex.A7. Ex.A7 requires registration.
He drew my attention to the decision of the Division Bench of the
Madras High Court reported in 1972-85-LW 251 (Modern Housing
Construction and Properties Limited vs. The Alagappa Textiles
(Cochin) Ltd.).
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5.The learned counsel for the appellant submits that since a
compulsorily registerable document had not been registered, it was
clearly not admissible in evidence. Merely because the said document
came to be marked, that would not mean that this Court ought to look
into the same. If an inadmissible document had been erroneously
marked in evidence, the same will have to be eschewed when the defect
pointed out. The other major contention is that the suit itself is not
maintainable because though it purports to have been laid on the
strength of the deposit of title deeds, the original title deeds have not
been filed in the court. He would strongly contend that on the strength
of photocopies of the original title deeds, mortgage by deposit of title
deeds cannot be created. He also submitted that the appellant is an
innocent lady who went by the words of Arunachalam (D2) that the
original documents have been misplaced. Since the transaction had
not been registered, the appellant did not have the opportunity to know
that there was prior encumbrance.
6.The appellant's counsel drew my attention to the plea taken by
the appellant that the mortgage has not been validly executed. He
submitted that all the four substantial questions of law framed in this
second appeal may be answered in favour of the appellant and the
second appeal itself may be allowed.
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7.Per contra, the learned counsel for the respondent submitted
that the impugned judgment passed by the first appellate court does
not warrant any interference and pressed for dismissal of the second
appeal.
8.I carefully considered the rival contentions and went through
the evidence on record. The suit filed by the plaintiff bank had suffered
dismissal before the trial court on account of not having complied with
the procedure set out in Section 67A of the Transfer of Property Act,
1882. There is no doubt that A.P.Arunachalam had created two
mortgage deeds with the plaintiff bank. The bank instead of filing a
single suit on the strength of both the mortgages had chosen to file two
separate suits, namely, O.S No.590 of 1993 and O.S No.784 of 1993.
9.The question is whether for having breached the mandate set
out in Section 67 A of the Transfer of Property Act, the suit filed by the
bank deserves to be dismissed. As rightly pointed out by the learned
counsel appearing for the respondent bank, though a clear mandate
has been set out in Section 67 A of the Transfer of Property Act, the
consequence of failure to adhere to the mandate has not been set out in
the provision. The distinction between a mandatory provision and a
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directory provision is well known. It has been held in more than one
decision that if the consequence of the breach have not been set out,
then that provision should be construed as directory and not as
mandatory. In as much as Section 67 A of the Act does not prescribe or
set out the consequence in case of failure to adhere to the mandate, it
is only a directory provision. It at all, the consequence can only fall on
the subsequent suit and definitely not on the first suit filed by the
mortgagee. That apart, the defence can be taken only by the mortgagor
and not by the subsequent purchaser. In the case on hand, the
mortgagor had chosen to remain exparte.
10.There is yet another impediment for the appellant. The
appellant had rightly filed Transfer O.P No.59 of 1997 before the
Principal District Judge, Madurai. Vide order dated 06.11.2000, the
learned Principal District Judge, Madurai had allowed the O.P and
directed transfer of O.S No.784 of 1993 from the file of the III Additional
Sub Judge to the file of the I Additional Sub Judge, Madurai to be tried
along with O.S No.590 of 1993. The order dated 06.11.2000 is not
quite clear. The order states that the earlier suit should be tried along
with the subsequent suit. In the very same order, it was stated that
two separate orders to be passed after trying the suits simultaneously.
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Whatever be the legal effect of the said order, the fact remains that the
two suits were ordered to be taken up together for disposal. The
appellant herein did not apply for rejection of plaint. Therefore, I
sustain the approach of the first appellate court for having come to the
conclusion that O.S No.590 of 1993 cannot be said to be bad or not
maintainable for having violated the mandate set out in Section 67 A of
the Act. I answer the first substantial question of law against the
appellant.
10.The other major issue that calls for my consideration is
whether Ex.A7 requires registration. As rightly pointed out by the
learned counsel on either side, if Ex.A7 represents the bargain between
the parties, then, it certainly would require registration. Otherwise, it
may not require registration.
11.The learned counsel for the bank would draw my attention to
the decision reported in 1998 2 LW. 251 (Ponnuswamy vs.
V.Santhammal and Ors.) The Hon'ble Judge had held that if the
memorandum does not contain the terms of the bargain between the
parties, then, it would not require registration. As rightly pointed out
by the learned counsel for the respondent bank, Ex.A7 merely states
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that the documents already deposited in respect of the account of the
Aruna Wines may be taken as deposited towards equitable mortgage for
Prakash Wines account. It does not incorporate any terms and
conditions. Even the rate of interest has not been mentioned. Ex.A7
does not represent bargain between the parties. Therefore, it does not
require registration.
12.The next question is whether by depositing Xerox copies of title
deeds, equitable mortgage can be created. Again, it depends on the
intention of the parties and the attendant circumstances. Of course,
it is only Arunachalam who would have been competent to speak on the
issue. The appellant who had taken over the property by exchange
cannot impeach on the genuineness of the transaction. Arunachalam
had chosen to remain exparte. The trial court had categorically had
given a finding that the appellant is not a bonafide purchaser. Since
the original documents in respect of the property were already lying
with the bank in respect of the loan availed by Aruna Wines, I hold that
even by depositing a photocopy of the title deed, a mortgage can be
created. This question of law is also answered against the appellant.
Merely because after execution of exchange deed in favour of the
appellant, Arunachalam had made an endorsement of renewal, it would
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not mean that the appellant stands discharged. Therefore, the third
and fourth substantial questions of law also are answered against the
appellant. I do not find any merit in this second appeal. It stands
dismissed. Connected miscellaneous petition is closed.
26.04.2021
Index : Yes / No
Internet : Yes/ No
skm
Note : In view of the present lock down owing to COVID-19
pandemic, a web copy of the order may be utilized for official
purposes, but, ensuring that the copy of the order that is
presented is the correct copy, shall be the responsibility of the
advocate/litigant concerned.
To
1.The Principal District Judge, Madurai.
2.I Additional Sub Judge, Madurai.
Copy to :
The Record Keeper, V.R.Section,
Madurai Bench of the Madras High Court, Madurai.
https://www.mhc.tn.gov.in/judis/
G.R.SWAMINATHAN, J.
skm
SA(MD)No.579 of 2011
and
MP(MD)No.1 of 2011
26.04.2021
https://www.mhc.tn.gov.in/judis/
