Nazeer Ahmed Vs. State Bank of Mysore & Ors  Insc 36 (12 January 2007)
Sema & P.K. Balasubramanyan (Arising out of Slp(C) No.20624 of 2004) P.K.
Defendant No. 1,
the appellant, borrowed a sum of Rs.1,10,000/- from the plaintiff Bank for the
purchase of a bus. He secured repayment of that loan by hypothecating the bus
and further by equitably mortgaging two items of immovable properties. The Bank
first filed O.S. No. 131 of 1984 for recovery of the money due. The said suit
was decreed. The Bank, in execution, sought to proceed against the hypothecated
bus. The bus could not be traced and the money could not be recovered.
Bank tried to proceed against the mortgaged properties in execution. The
appellant resisted by pointing out that there was no decree on the mortgage and
the bank could, if at all, only attach the properties and could not sell it
straightaway. That objection was upheld.
Bank thereupon instituted the present suit, O.S. No.
of 1993, for enforcement of the equitable mortgage.
appellant resisted the suit by pleading that the suit was barred by Order II
Rule 2 of the Code of Civil Procedure, that the transaction of loan stood
satisfied by a tripartite arrangement and transfer of the vehicle to one Fernandes,
that there was no valid equitable mortgage created and no amount could be
recovered from him based on it and that the suit was barred by limitation.
The trial court
held that the suit was not hit by Order II Rule 2 of the Code. It also held
that the appellant has not proved that the loan transaction has come to an end
by the claim being satisfied. But, it dismissed the suit holding that the suit
was barred by limitation. It also held that there was no creation of a valid
equitable mortgage since the memorandum in that behalf was not registered.
Bank filed an appeal in the High Court. The High Court held that the memorandum
did not require registration and that a valid and enforceable equitable
mortgage was created. The suit was held to be in time. It held that the suit
was hit by Order II Rule 2 of the Code.
since the appellant had not challenged the finding of the trial court that the
suit was not hit by Order II Rule 2 of the Code by filing a memorandum of cross
objections, the plea in that behalf could not be and need not be upheld. It
purported to invoke Order XLI Rule 33 of the Code to grant the Bank a decree
against the appellant though it refused a decree to the Bank against the
guarantor. It did not disturb the finding of the trial court on the tripartite
arrangement set up by the appellant based on the alleged transfer of the
by the decree, the appellant approached this Court with the Petition for
Special Leave to Appeal. This Court while issuing notice, confined the appeal
to two questions. They were:
Why the second
suit would not be hit by Order 2 Rule 2, C.P.C.?; and
In view of the
finding arrived at vide para 19 of the judgment (Annexure P-2), why defendant
No.1 should not have been held to have been discharged from the liability?
We do not think
it necessary to broaden the scope of challenge in this appeal in the light of
the findings entered and in the circumstances of the case. We are therefore
inclined only to examine the two questions posed by this Court at the stage of
issuing notice in the Petition for Special Leave to Appeal.
We will first
consider whether the suit is barred by Order II Rule 2 of the Code. Whereas the
trial court held that the suit on the equitable mortgage filed by the Bank was
not barred by Order II Rule 2 of the Code especially in the context of Order
XXXIV Rules 14 and 15 of the Code, the High Court was inclined to the view that
the suit was barred, though it did not accede to the prayer of the appellant to
dismiss the suit as being hit by Order II Rule 2 of the Code. The High Court
seems to have been of the view that since the Bank in the prior suit omitted to
sue on the equitable mortgage without the leave of the court, the present suit
was barred. But it proceeded to rely on Order XLI Rule 33 of the Code and ended
up by granting the Bank a decree against the appellant. It is not very clear to
us why Order XLI Rule 33 of the Code or the principle embodied therein has to
be invoked in the case, since the plaintiff Bank had filed an appeal against
the decree dismissing its suit and was claiming the relief claimed in the suit..
The High Court,
in our view, was clearly in error in holding that the appellant not having
filed a memorandum of cross-objections in terms of Order XLI Rule 22 of the
Code, could not challenge the finding of the trial court that the suit was not
barred by Order II Rule 2 of the Code. The respondent in an appeal is entitled
to support the decree of the trial court even by challenging any of the
findings that might have been rendered by the trial court against himself. For
supporting the decree passed by the trial court, it is not necessary for a
respondent in the appeal, to file a memorandum of cross- objections challenging
a particular finding that is rendered by the trial court against him when the
ultimate decree itself is in his favour. A memorandum of cross-objections is
needed only if the respondent claims any relief which had been negatived to him
by the trial court and in addition to what he has already been given by the
decree under challenge. We have therefore no hesitation in accepting the
submission of the learned counsel for the appellant that the High Court was in
error in proceeding on the basis that the appellant not having filed a
memorandum of cross-objections, was not entitled to canvass the correctness of
the finding on the bar of Order II Rule 2 rendered by the trial court.
We also see
considerable force in the submission of learned counsel for the appellants that
the High Court has misconceived the object of Order XLI Rule 33 of the Code and
has erred in invoking it for the purpose of granting the plaintiff Bank a
decree. This is a case where the suit filed by the plaintiff Bank had been
dismissed by the trial court. The plaintiff Bank had come up in appeal.
entitled to challenge all the findings rendered against it by the trial court
and seek a decree as prayed for in the plaint, from the appellate court. Once
it is found entitled to a decree on the basis of the reasoning of the appellate
court, the suit could be decreed by reversing the appropriate findings of the
trial court on which the dismissal of the suit was based. For this, no recourse
to Order XLI Rule 33 is necessary. Order XLI Rule 33 enables the appellate
court to pass any decree that ought to have been passed by the trial court or
grant any further decree as the case may require and the power could be
exercised notwithstanding that the appeal was only against a part of the decree
and could even be exercised in favour of the respondents, though the
respondents might not have filed any appeal or objection against what has been
decreed. There is no need to have recourse to Order XLI Rule 33 of the Code, in
a case where the suit of the plaintiff has been dismissed and the plaintiff has
come up in appeal claiming a decree as prayed for by him in the suit. Then, it
will be a question of entertaining the appeal considering the relevant
questions and granting the plaintiff the relief he had sought for if he is
found entitled to it. In the case on hand therefore there was no occasion for
applying Order XLI Rule 33 of the Code. If the view of the High Court was that
the suit was barred by Order II Rule 2 of the Code, it is difficult to see how
it could have resorted to Order XLI Rule 33 of the Code to grant a decree to
the plaintiff in such a suit. In that case, a decree has to be declined. That
part of the reasoning of the High Court is therefore unsustainable.
Now, we come to
the merit of the contention of the appellant that the present suit is hit by
Order II Rule 2 of the Code in view of the fact that the plaintiff omitted to
claim relief based on the mortgage, in the earlier suit O.S.
131 of 1984. Obviously, the burden to establish this plea was on the appellant.
The appellant has not even cared to produce the plaint in the earlier suit to
show what exactly was the cause of action put in suit by the Bank in that suit.
That the production of pleadings is a must is clear from the decisions of this
Court in Gurbux Waterproof Manufacturing Co. & Anr. [(1996) Supp. 8 S.C.R.
695]. From the present plaint, especially paragraphs 10 to 12 thereof, it is
seen that the Bank had earlier sued for recovery of the loan with interest
thereon as a money suit. No relief was claimed for recovery of the money on the
foot of the equitable mortgage. In that suit, the Bank appears to have
attempted in execution, to bring the mortgaged properties to sale. The
appellant had objected that the suit not being on the mortgage, the mortgaged
properties could not be sold in execution without an attachment. That objection
was upheld. The Bank was therefore suing in enforcement of the mortgage by
deposit of title deeds by the appellant.
From this, it is not possible to say
that the present claim of the plaintiff Bank has arisen out of the same cause
of action that was put forward in O.S. No. 131 of 1984. What Order II Rule 2
insists upon is the inclusion of the whole of the claim which the plaintiff is
entitled to make in respect of the cause of action put in suit. We must notice
at this stage that in respect of a suit in enforcement of a mortgage, the bar
under Order II Rule 2 has been kept out by Order XXXIV Rule 14 of the Code.
15 of Order XXXIV makes the rules of Order XXXIV applicable to a mortgage by
deposit of title deeds. We may quote Order XXXIV Rule 14 hereunder:
for sale necessary for bringing mortgaged property to sale (1) Where a
mortgage has obtained a decree for the payment of money in satisfaction of a
claim arising under the mortgage, he shall not be entitled to bring the
mortgaged property to sale otherwise than by instituting a suit for sale in
enforcement of the mortgage, and he may institute such suit notwithstanding
anything contained in Order II Rule 2.
Nothing in sub-rule (1) shall apply to any territories to which the Transfer of
Property Act, 1882 (4 of 1882), has not been extended."
It is clear from sub-rule (1) of
Rule 14 of Order XXXIV of the Code that notwithstanding anything contained in
Order II Rule 2 of the Code, a suit for sale in enforcement of the mortgage can
be filed by the plaintiff Bank and in fact that is the only remedy available to
the Bank to enforce the mortgage since it would not be entitled to bring the
mortgaged property to sale without instituting such a suit. Be it noted, that
Rule 14 has been enacted for the protection of the mortgagor. In the context of
Rule 14 of Order 34 of the Code, it is difficult to uphold a plea based on
Order II Rule 2. If the appellant wanted to show that the causes of action were
identical in the two suits, it was necessary for the appellant to have marked
in evidence the earlier plaint and make out that there was a relinquishment of
a relief by the plaintiff, without the leave of the court. Even then, the
effect of Rule 14 will remain to be considered.
That apart, the cause of action for
recovery of money based on a medium term loan transaction simpliciter or in
enforcement of the hypothecation of the bus available in the present case, is a
cause of action different from the cause of action arising out of an equitable
mortgage, though the ultimate relief that the plaintiff Bank is entitled to is
the recovery of the term loan that was granted to the appellant. On the scope
of Order II Rule 2, the Privy Council in Payana Reena Saminatha 142] has held
that Order II Rule 2 is directed to securing an exhaustion of the relief in
respect of a cause of action and not to the inclusion in one and the same
action of different causes of action, even though they may arise from the same
transactions. In Mohammad Khalil Khan Council 78 (75 Indian Appeals 121)], the
Privy Council has summarised the principle thus:
principles laid down in the cases thus far discussed may be thus summarised:
The correct test in cases falling under O.2, R.2, is "whether the claim in
the new suit is in fact founded upon a cause of action distinct from that which
was the foundation for the former suit." Moonshee Buzloor Ruheem V. Shumsunnissa
Begum, (1867-11 M.I.A. 551 : 2 Sar. 259 P.C.) (supra) (2) The cause of action
means every fact which will be necessary for the plaintiff to prove if
traversed in order to support his right to the judgment. Read V. Brown,
(1889-22 Q.B.D. 128 : 58 L.J.Q.B. 120) (supra) (3) If the evidence to support
the two claims is different, then the causes of action are also different. Brundsden
(1884-14 Q.B.D. 141 : 53 L.J.Q.B. 476) (supra) (4) The causes of action in the
two suits may be considered to be the same if in substance they are identical. Brundsden
(1884-14 Q.B.D. 141 : 53 L.J.Q.B. 476) (supra) (5) The causes of action has no
relation whatever to the defence that may be set up by the defendant nor does
it depend upon the character of the relief prayed for by the plaintiff. It refers
. to the media upon which the plaintiff asks the Court to arrive at a
conclusion in his favour. Muss.
v. Partab Singh, (15 I.A. 156 :
16 Cal. 98 P.C.) (supra). This observation was made by Lord
Watson in a case under S. 43 of the Act of 1882 (corresponding to O.2 R.2),
where plaintiff made various claims in the same suit."
A Constitution Bench of this Court
has explained the scope of the plea based on Order II Rule 2 of be useful to
quote from the Head note of that decision:
A plea under
Order 2 rule 2 of the Code based on the existence of a former pleading cannot
be entertained when the pleading on which it rests has not been produced. It is
for this reason that a plea of a bar under O.2 r.2 of the Code can be established
only if the defendant files in evidence the pleadings in the previous suit and
thereby proves to the court the identity of the cause of action in the two
suits. In other words a plea under O.2 r.2 of the Code cannot be made out
except on proof of the plaint in the previous suit the filing of which is said
to create the bar. Without placing before the court the plaint in which those
facts were alleged, the defendant cannot invite the court to speculate or infer
by a process of deduction what those facts might be with reference to the reliefs
which were then claimed. On the facts of this case it has to be held that the
plea of a bar under O.2 r.2 of the Code should not have been entertained at all
by the trial court because the pleadings in civil suit No. 28 of 1950 were not
filed by the appellant in support of this plea.
In order that a
plea of a bar under O. 2.
2(3) of the Code should succeed the defendant who raises the plea must make out
that the second
suit was in respect of the same cause of action as that on which the previous
suit was based;
that in respect
of that cause of action the plaintiff was entitled to more than one relief
that being thus
entitled to more than one relief the plaintiff, without leave obtained from the
Court omitted to sue for the relief for which the second suit had been filed.
not necessary to multiply authorities except to notice Chand & Anr. [(1995)
Supp. 4 S.C.R. 369] and State of Company, Bombay and Anr. [(1996) 1 S.C.R. 293] have
reiterated and re-emphasized this principle.
Applying the test so laid down, it
is not possible to come to the conclusion that the suit to enforce the
equitable mortgage is hit by Order II Rule 2 of the Code in view of the earlier
suit for recovery of the mid term loan, especially in the context of Order
XXXIV Rule 14 of the Code. The two causes of action are different, though they
might have been parts of the same transaction. Even otherwise, Order XXXIV rule
14 read with rule 15 removes the bar if any that may be attracted by virtue of
Order II Rule 2 of the Code. The decision of the Rangoon High Rangoon 158)
relied on by learned counsel for the appellant does not enable him to
successfully canvass for the position that the present suit was barred by Order
II Rule 2 of the Code, as the said decision itself has pointed out the effect
of Order XXXIV Rule 14 and in the light of what we have stated above.
Then the question is whether the
appellant has established that there was a tripartite arrangement come to, by
which the bus was made over by him to one Fernandes and Fernandes undertook to
the Bank to discharge the liability under the mid term loan. In support of his
case, the appellant had only produced Exhibits D1 to D4 which only indicate an
attempt to bring about an arrangement of that nature. But they do not show that
there was any such concluded arrangement and there was a taking over of the
liability by Fernandes as agreed to by the Bank. The fact that the Bank has
paid the insurance premium for the bus in question, would not advance the case
of the appellant since the Bank, as the hypothecatee of the bus was entitled to
and in fact, as a prudent mortgagee, was bound to, protect the security and the
insurance of the vehicle effected in that behalf cannot be taken as a
circumstance in support of the plea put forward by the appellant. The trial
court, after considering the evidence, rightly noticed that the burden was on
the appellant to show that he had handed over the possession of the vehicle to
one Fernandes on the intervention of the Bank and on the basis of a tripartite
arrangement or taking over of liability by Fernandes and that the liability of
the appellant had come to an end thereby. Learned counsel for the Bank rightly
submitted that no novation was proved so as to enable the appellant to riggle
out of the liability under the loan transaction.
High Court has not interfered with the reasoning and conclusion of the trial
court on this aspect and has in fact proceeded to grant the plaintiff Bank a
decree for the suit amount based on the equitable mortgage. We were taken
through Exhibits D1 to D4 and even a fresh document attempted to be marked in
this Court along with its counter affidavit by the Bank. On going through the
said documents, the other evidence and the reasoning adopted by the trial
court, we are satisfied that there is no evidence to show that there was a
tripartite agreement on the basis of which the appellant could disclaim
liability based on it.
seen that the appellant has not even examined Fernandes in support of the plea
of the tripartite arrangement and the taking over of the liability of the
appellant, by him. In this situation, we see no reason to uphold the plea of
the appellant that the liability has been transferred to Fernandes at the
instance of the Bank and that the appellant was no more liable for the plaint
Thus, on a consideration of all the
relevant aspects, we are satisfied that the High Court was correct in granting
the Bank a decree in the suit. There is therefore no reason to interfere with
that decree. We therefore confirm the judgment and decree of the High Court and
dismiss this appeal with costs.