Mortgage; Narayanan Vs. Sudarsan Trading Co. Ltd. [Kerala High Court, 06-07-1978]

Transfer of Property Act, 1882 – Section 58 (f) – Mortgage by deposit of title deeds – Suit for money due on a promissory note – Letter regarding deposit of title deeds does not create a mortgage – It is only a record of the transaction already entered into by the delivery of the title deeds – the letter itself was written giving the list of title deeds relating to the properties concerned – plaintiff would be entitled to a decree for sale of property also.

Mortgage

ILR 1979 (1) Ker. 710

IN THE HIGH COURT OF KERALA AT ERNAKULAM

T. Chandrasekhara Menon, J.

July 6, 1978

Sudarsan Trading Co. Vs. Sankar

S.A. No. 731 of 1975

Advocates: For Appellants: K.P. Dandapani, Sumathi Dandapani; For Respondent: K.P. Radhakrishna Menon, K.K. Ravindranath

JUDGMENT

1. The appellant is the plaintiff in O.S. 56/72 on the file of the Munsiff Court, Payyannur. The suit was for recovery of a sum of Rs. 4,215 alleged to be the balance principal and interest due on a promissory note.

2. Appellant plaintiff is a company registered under the Indian Companies Act. The first respondent joined a kuri conducted by the plaintiff company at Payyannur Branch. On the 5th instalment, the first defendant bid the kuri and received the price amount on 13th August 1969. At that time as security for future subscriptions to the kuri, the defendants executed a surety and security proposal form on 30th June 1969 as per Ext. A-1. On 13th August 1969, a pronote Ext. A-2 for Rs. 4,400 was executed as security for the future instalments due from the first defendant to the company. Second defendant stood as surety. According to the plaintiff after the execution of the promissory note the first defendant had made payments of Rs. 750 which is inclusive of the dividends upto 8th February, 1972. The amount due from 14th instalment is kept due. A notice was issued demanding the defendants to pay the entire balance amount as per Ext. A-7 on 20th September 1971. In the plaint it had been stated that title deeds deposited in the Cannanore Branch by the second defendant over properties allotted to her share in partition amounts to a mortgage by a deposit of title deeds. The plaintiff sought realisation of the amount concerned personally from the defendants and also by sale of the property mortgaged.

3. In the joint written statement filed by the defendants, it is admitted that the first defendant joined the kuri and bid the same. But the payment of consideration of Rs. 4,400 under Ext. A-2 had been denied. According to them there was no payment on the date of Ext. A-2, and only Rs. 3,735 had been paid to the first defendant by cheque to a Bank in Cannanore and the Payyannur Court before which the suit was filed had no jurisdiction to entertain the matter. It is stated that the second defendant was an unnecessary party to the suit and only the first defendant who received the consideration was liable. It is also asserted therein that some amounts that had been paid had not been credited in the plaint. According to them the total amount discharged by the first defendant was Rs. 1,440. It is also contended that the first defendant was entitled to a dividend which comes to Rs. 1,265. A contention has also been taken that the legal requirements for the creation of mortgage by deposit of title deeds have not been complied with in the case and the suit on the basis of mortgage is not maintainable.

4. The Trial Court decided that Ext. A-2 is supported by consideration and the partial discharge pleaded by the defendants is not true. It was also held that the second defendant is a necessary party to the suit and liable under Ext. A-2. According to that court no valid mortgage by deposit of title deeds had been created and a decree fur the sale cannot be granted. Learned Munsiff also held on the basis of a decision of a Division Bench of this court in

Raghavan v. Subbrama Sastrigal, 1971 KLT 231

that the provision for collecting the entire future instalments in a lump even before the termination of the kuri and 12 per cent interest from a defaulting prized subscriber is unconscionable and unenforceable in law. The court came to the conclusion that defendants are entitled to get dividend and granted a decree for an amount of Rs. 3,700 less dividend with interest from 27th February 1970 from the defendants. The plaintiff was directed to file a statement showing the correct dividend within 10 days from the date of judgment with interest at 6 per cent from the date of 14th instalment. Parties were to bear their costs.

5. The matter was taken up to the District Court, Tellicherry, by the plaintiff in appeal. The respondents filed a memorandum of Cross Objection claiming credit for Rs. 2,101 and also for adjustment of dividends coming to Rs. 871.18. They also claimed costs. The finding of the Trial Court was to some extent modified by the appellate court. The decision of the Trial Court that the plaintiff is not entitled to decree for sale and entitled only for a personal decree on the basis of Ext. A-2 was confirmed. The decision of the Trial Court that the defendants are entitled for dividend was also confirmed. But on the basis that the amount of dividend is undetermined, the case was remanded to the Trial Court for refixing the dividend to be adjusted after affording further opportunity to both parties. The Trial Court was also asked to determine the question of discharge taking into consideration Ext. B-1 to B-4 which are receipts issued by the plaintiff company. The court also held that the parties are entitled to pay and receive proportionate costs in both the courts. It is in these circumstances that the plaintiff has approached this court in this S. A.

6. As regards the question of the plaintiff’s entitlement to refuse dividend to the defendants and claim interest at 12 per cent, I think the matter is concluded by a Full Bench decision of this court in

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