Madras High Court
K.Rangan vs N.Shivaraj on 31 August, 2021
1 A.S.(MD)NO.78 OF 2013
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 31.08.2021
CORAM
THE HONOURABLE MR.JUSTICE G.R.SWAMINATHAN
A.S.(MD)No.78 of 2013
K.Rangan ... Appellant / 6th Defendant
Vs.
1. N.Shivaraj
2. K.Sheela ... Respondents/Plaintiffs
3. Rathinambal
4. M.Rajendran
5. M.Marudappan ... Respondents/Defendants 1 to 3
6. M.Natarajan
7. Devika Rani ... Respondents / Defendants 4 & 5
Prayer: Appeal suit filed under Section 96 of C.P.C.,
to set aside the Judgment and Decree dated 12.12.2012 in
O.S.No.51 of 2009 on the file of the I Additional District Judge,
Tiruchirappalli and allow this appeal suit.
For Appellant : Mr.H.Arumugam,
for Mr.B.Jameel Arasu.
For R-1 & R-2 : Mr.R.Sundar
For R-3 to R-7 : Ms.J.Maria Roseline
***
https://www.mhc.tn.gov.in/judis/
1/15
2 A.S.(MD)NO.78 OF 2013
JUDGMENT
This appeal is directed against the judgment and
decree dated 12.12.2012 made in O.S.No.51 of 2009 on the
file of the I Additional District Judge(PCR)(FAC),
Tiruchirappalli.
2. The sixth defendant in the suit is the appellant
herein. The suit was filed by respondents 1 and 2 herein for
passing preliminary mortgage decree declaring the amount
due under the suit mortgage with interest and for directing
the defendants to pay the said amount to the plaintiffs on or
before the date to be fixed by the Court and in default to pass
final decree for the sale of the suit property.
3. The case of the plaintiffs is that the deceased
Muthuramalinga Rathinavelu Chettiar and his son
M.Natarajan(4th defendant) approached the plaintiffs and
borrowed a sum of Rs.6,50,000/- on 18.04.2005. They
executed Ex.A.1 promissory note dated 18.04.2005
undertaking to repay the said amount with interest at 24% p.a.
https://www.mhc.tn.gov.in/judis/
3 A.S.(MD)NO.78 OF 2013
The promissory note was executed by the deceased
Muthuramalinga Rathinavelu Chettiar and the fourth
defendant M.Natarajan. It was attested by the other two sons,
namely, defendants 2 and 3. Two days later, Muthuramalinga
Rathinavelu Chettiar came to the plaintiffs' house and
deposited the title document (Ex.A.3 dated 26.07.1970) with
an intention to create an equitable mortgage by deposit of title
deeds. He also executed Ex.A.2 memorandum of deposit of
title deeds dated 20.04.2005. Ex.A.2 was also attested by
defendants 2 and 4.
4.Muthuramalinga Rathinavelu Chettiar subsequently
passed away. His legal heirs instead of clearing the mortgage
liability, sold the property in favour of the appellant herein on
07.11.2008 vide Ex.A.20 for a sum of Rs.9,25,000/-. The
appellant had retained a sum of Rs.2,00,000/- and had paid the
balance sale consideration. The retained amount was to be
paid to the vendors, after the original title document said to
have been missing is found out and handed over. The plaintiffs
also stated that the deceased mortgagor had availed loans
from other persons and one of the creditors, namely,
https://www.mhc.tn.gov.in/judis/
4 A.S.(MD)NO.78 OF 2013
Chitraleka filed I.P.No.4 of 2005. During the pendency of the
insolvency petition, the sale in favour of the appellant took
place. The insolvency petition was withdrawn on 11.11.2008
as not pressed. Though the plaintiffs had earlier got
themselves impleaded in I.P.No.4 of 2005, their endeavour to
revive the I.P. was not successful. Left with no other option,
they filed O.S.No.51 of 2009 for enforcing the suit mortgage.
5. The appellant filed written statement controverting
the plaint averments. His stand was that he was a bona fide
purchaser for valuable consideration. His vendors had told
him that the parent documents were missing and that they
could not be found out. The appellant believed their words and
entered into the transaction. The appellant would allege
collusion between his vendors and the plaintiffs. The vendors
who were shown as defendants 1 to 4 also filed written
statement. They denied the suit transaction in its entirety.
6. Based on the rival pleadings, the Court below
framed the necessary issues. The first plaintiff examined
himself as P.W.1 and marked Ex.A.1 to Ex.A.21. The appellant
https://www.mhc.tn.gov.in/judis/
5 A.S.(MD)NO.78 OF 2013
examined himself as D.W.1 and marked Ex.B.1 to Ex.B.14.
After a consideration of the evidence on record, the Court
below passed preliminary decree and the defendants were
directed to pay the plaintiffs the suit claim of Rs.11,17,675/-
together with interest at 12% p.a. from the date of plaint till
the date of realisation. Challenging the same, the
purchaser /D6 filed this first appeal.
7. The learned counsel appearing for the appellant
submitted that the collusion between the plaintiffs and the
appellant's vendors is apparent. The borrowal had taken place
on 18.04.2005. The plaintiffs had lent money on the strength
of Ex.A.1 promissory note. It is improbable that the deceased
borrower, namely, Muthuramalinga Rathinavelu Chettiar
could have voluntarily come two days later on 20.04.2005 and
deposited the original sale deed dated 26.07.1970(Ex.A.3). In
any event, Ex.A.2 memorandum of title deeds which was
executed on the same day required registration. Since it has
not been registered, the Court below could not have taken it
into account. If Ex.A.2 is eschewed out of consideration, then
the plaintiffs could not have filed the suit on the strength of
https://www.mhc.tn.gov.in/judis/
6 A.S.(MD)NO.78 OF 2013
mortgage. They could have sought recovery of the borrowed
amount only on the strength of Ex.A.1 promissory note in
which event, the suit would have been hit by limitation. He
also pointed out that Chitraleka, one of the creditors of
Muthuramalinga Rathinavelu Chettiar had filed an insolvency
petition. It appears that the suit transaction had been created
for the purpose of defeating the said insolvency petition. The
insolvency petition was filed on 31.03.2005. The suit
transactions are said to have taken place in the third week of
April 2005. When the plaintiffs got themselves impleaded in
the said I.P., the creditor Chitraleka had impeached the suit
transaction as collusive. The collusive nature of the
transaction is further evident from the fact that on 26.04.2005
itself, the plaintiffs issued a notice as if Muthuramalinga
Rathinavelu Chettiar was attempting to alienate the
mortgaged property. Interestingly, no reply was issued by the
borrower. A second notice was also sent on 10.09.2008 and
without formally responding to the same, intimation was given
as if caveats have been filed by the borrowers. The purchaser
genuinely believed that the title documents were missing and
that is why, he retained a sum of Rs.2,00,000/- undertaking to
https://www.mhc.tn.gov.in/judis/
7 A.S.(MD)NO.78 OF 2013
pay the said amount, as and when the title documents are
handed over to him. The learned counsel appearing for the
appellant wanted this Court to see through the game sought to
be played by the plaintiffs in collusion with the appellant's
vendors. He pointed out that the appellant's vendors though
filed written statement and also took part in the case of trial,
did not enter the witness box. He emphasised that even if the
suit transaction is assumed to be genuine, Ex.A.2
memorandum of deposit of title deeds requires compulsory
registration and in as much as it has not been registered, it is
inadmissible in evidence. Once the inadmissibility of Ex.A.2 is
sustained, the suit has to necessarily fail. He called upon this
Court to set aside the impugned judgment and decree and
allow this appeal and dismiss the suit.
8. The learned counsel appearing for the appellant's
vendors reiterated the stand set out in the written statement.
9. The learned counsel appearing for respondents 1
and 2/plaintiffs submitted that the impugned judgment is a
well reasoned one and that it does not call for any
interference.
https://www.mhc.tn.gov.in/judis/
8 A.S.(MD)NO.78 OF 2013
10. I carefully considered the rival contentions and
went through the evidence on record.
11. The points for consideration are as follows:-
a) Whether the plaintiffs have
established that the mortgage was created on
the suit property by deposit of title deeds?
b) Whether Ex.A.2 memorandum of
deposit of title deeds dated 20.04.2005 required
registration?
12. The rival versions projected by the parties have
already been set out. According to the plaintiffs, a sum of
Rs.6,50,000/- was borrowed by Muthuramalinga Rathinavelu
Chettiar and the fourth defendant on 18.04.2005. Ex.A.1 was
attested by defendants 2 and 3 who are none other than the
sons of Muthuramalinga Rathinavelu Chettiar.
Muthuramalinga Rathinavelu Chettiar had passed away by the
time the suit was filed. Even though the legal heirs of
Muthuramalinga Rathinavelu Chettiar had filed written
https://www.mhc.tn.gov.in/judis/
9 A.S.(MD)NO.78 OF 2013
statement and also taken part in the trial, they kept away from
the witness box. The Court below was therefore justified in
drawing adverse inference against them. The first plaintiff was
examined as P.W.1 and Ex.A.1 promissory note was also
marked. Thus the plaintiffs clearly established that the
deceased Muthuramalinga Rathinavelu Chettiar and his son
fourth defendant Natarajan borrowed a sum of Rs.6,50,000/-
on 18.04.2005. The only question that calls for determination
is whether Ex.A.2 memorandum of deposit of title deeds
requires registration.
13. The learned counsel appearing for the appellant
relied on the decisions reported in AIR 1970 SC 659 (Deb Dutt
Seal V. Raman Lal Phumra and others) and 2021-3-L.W.240
(Lakshmi Ammal V. The Catholic Syrian Bank Ltd., and others)
for the proposition that when the document represents the
bargain between the parties, it would require registration. In
other words, where the document discloses creation of
mortgage, it warrants registration. He also placed reliance on
the decisions reported in AIR 1977 Andhra Pradesh 123
(Rachapudi Venkata Subba Rao V. Lingineni Lakshmiah
https://www.mhc.tn.gov.in/judis/
10 A.S.(MD)NO.78 OF 2013
Chowdary and others), AIR 1998 Ker 344 (Hubert Peyoli Vs.
Santhavilasathu Kesavan) and AIR 1962 Madras 258
(Indersain V. Mohammed Raza Gowher and another) for the
proposition that where a document warranting registration is
not registered, it cannot be an admissible evidence to prove a
valid equitable mortgage by deposit of title deeds.
14. There cannot be any quarrel with the propositions
advanced by the learned counsel appearing for the appellant.
The only question is whether by virtue of Ex.A.2 equitable
mortgage was created or whether it is merely a record of an
antecedent transaction. Ex.A.2 states that on 18.04.2005,
Muthuramalinga Rathinavelu Chettiar and M.Natarajan have
executed a promissory note in favour of the plaintiffs and had
availed a loan of Rs.6,50,000/- undertaking to repay the same
with interest at 24% p.a. It further recites that to secure the
said transaction, Muthuramalinga Rathinavelu Chettiar had
handed over the title document, E.B.receipt as well as the
property tax receipt(Ex.A.3 and Ex.A.4). The expression
employed in Ex.A.2 is as follows:-
“GNuh Nehl;bw;F [hkPdhf ,d;W ehd; kdg;g+h;tkhf jq;fsplk;
xg;gilj;Js;Nsd;.”
https://www.mhc.tn.gov.in/judis/
11 A.S.(MD)NO.78 OF 2013
It does not employ the expression“xg;gilf;fpNwd;". The terms of
bargain between the parties are set out in Ex.A.1 promissory
note that was executed on 18.04.2005. The principal amount
borrowed and the rate of interest are already found in the
promissory note dated 18.04.2005. The deposit of title deeds
was only to secure the said transaction. As a record thereof,
Ex.A.2 was executed. It is true that the deposit of title deeds
as well as the execution of memorandum of deposit of title
deeds are on the same date. But that would not be
determinative of the issue. One has to go by the terms of the
document. If the memorandum of deposit of title deeds is a
record of an event, it does not require registration even
though the event recorded had taken place on the same date.
In the case on hand, the borrowal took place two days earlier
and to record the deposit of title deed, the memorandum of
deposit of title deeds was also executed. I construe Ex.A.2 as
an evidential document and not as a operative document.
Therefore, Ex.A.2 does not require registration.
15. I am also not persuaded to hold that the appellant
is a bona fide purchaser for consideration. The appellant knew
https://www.mhc.tn.gov.in/judis/
12 A.S.(MD)NO.78 OF 2013
that his vendors were facing insolvency proceedings. One of
the creditors of Muthuramalinga Rathinavelu Chettiar had
filed I.P.No.4 of 2005 and during its pendency, the sale in
favour of the appellant had taken place. Soon after the sale
transaction was concluded, I.P.No.4 of 2005 was also
dismissed as not pressed. It is obvious that the claim of the
creditor who filed I.P.No.4 of 2005 was settled and that is why
it was dismissed as not pressed. Of course in the said I.P.No.4
of 2005, the suit transaction had been impeached. When no
finding as regards the suit transaction was rendered in I.P.
No.4 of 2005 on merits, on the strength of the pleadings made
therein, I cannot come to any conclusion. The appellant as a
prudent purchaser ought to have insisted on production of the
original title documents. He could not have glibly believed the
statement of his vendors that the title document was missing.
If the appellant had given publication in any prominent
newspaper having local circulation, then that might have
reinforced his plea. He has not done so. The appellant who
obviously had knowledge of the pendency of I.P.No.4 of 2005,
could have issued notice to all the parties in I.P.No.4 of 2005.
He had not shown due diligence. I, therefore, agree with the
https://www.mhc.tn.gov.in/judis/
13 A.S.(MD)NO.78 OF 2013
finding of the trial Court that the plaintiffs were entitled to
enforce the suit mortgage.
16. However, I find considerable force in the
contention of the learned counsel appearing for the appellant
that award of interest at 12% p.a. is on the higher side. The
learned counsel relied on the decision reported in AIR 1998
SC 1101 (N.M.Veerappa V. Canara Bank) and AIR 1969 SC
600 (Soli Pestonji Majoo V. Ganga Dhar Khemka) for the
proposition that though Section 34 of C.P.C. is not applicable
to mortgage transactions, Order 34 Rule 11 of C.P.C. will
enable the Court to award interest at a lesser rate. Interest at
12% p.a. awarded to the plaintiffs is reduced to 6% p.a. The
defendants are directed to pay the plaintiffs the sum of
Rs.12,23,219/- with interest on Rs.6,50,000/- @ 6% p.a. from
the date of plaint till the date of realisation. The impugned
judgement and decree of the Court below is modified to this
extent. In all other respects, it is confirmed.
17. The appellant is at liberty to proceed against his
vendors for recovering the decretal amount which he has now
https://www.mhc.tn.gov.in/judis/
14 A.S.(MD)NO.78 OF 2013
been directed to pay. Of course the amount of Rs.2,00,000/-
with interest at 12% p.a. will have to be deducted from such a
claim. This appeal suit is partly allowed coupled with the
aforesaid liberty to the appellant to proceed against his
vendors. No costs. Consequently, connected miscellaneous
petition is closed.
31.08.2021
Index : Yes / No
Internet : Yes/ No
PMU
Note: 1. 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.
2. Web copy of this order shall be
uploaded on 02.09.2021.
To:
1. The I Additional District Judge,
Tiruchirappalli.
2. The Record Keeper, V.R.Section,
Madurai Bench of Madras High Court, Madurai.
https://www.mhc.tn.gov.in/judis/
15 A.S.(MD)NO.78 OF 2013
Note : Web copy of this order
shall be uploaded on 02.09.2021
G.R.SWAMINATHAN,J.
PMU
A.S.(MD)No.78 of 2013
https://www.mhc.tn.gov.in/judis/
16 A.S.(MD)NO.78 OF 2013
31.08.2021
https://www.mhc.tn.gov.in/judis/
