Kidar Nath Vs. Mangat Rai & Ors
[1969] INSC 323 (31 October 1969)
31/10/1969
ACT:
Transfer of Property Act (4 of 1882), s. 58
(f), anomalous mortgage, what is.
Punjab Relief of Indebtedness Act, 1934, s.
30-Whether legal representatives of debtor entitled to apply for reliefscope
of.
Usurious Loans Act, 1918, ss. 2(3)(a) (b) and
(c) and s.
3(2)(e)Scope of.
HEADNOTE:
In a suit for redemption of a mortgage with
possession under a mortgage deed of 1896, the Court declared the amount due on
the mortgages. No payment was made under the decree by the mortgagor. Instead,
on his death, his representatives applied for relief under s. 30 of the Punjab
Relief of Indebtedness Act, 1934 and the Usurious Loans Act, 1918, as amended
by the East Punjab Amendment Act, 1948. The applicants were given relief by the
High Court and the representatives of the mortgagee appealed to this Court.
HELD : (1) Under the covenants in the
mortgage deed, there is a stipulated rate of interest payable by the mortgagor,
and the amount recovered from the income was to be first applied towards
interest and the balance towards principal.
It was an anomalous mortgage and not a
usufructuary mortgage. The liability of the mortgagor to pay the money due
under the mortgage and to pay interest accruing due creates a debt, even if it
be assumed that the mortgagee had no right to enforce the mortgage by sale but
only had a right of foreclosure. [217 H, 218 C] (2) The obligation is
enforceable against the estate of the debtor in the hands of his legal
representatives. When it is so sought to be enforced, in the absence of an
express provision to the contrary, the representatives may set up the defence
which the original debtor could, if he had been sued. There is no warrant,
therefore, for the contention that the jurisdiction of 'the court under s. 30
of the Punjab Relief of Indebtedness Act, is attracted only when the original
debtor is the applicant and not on the application of his legal
representatives. [218 H; 219 Al (3) The legal representatives were not entitled
to claim the benefit of the Usurious Loans Act, 1918. Section 2(3) (a) and (b)
do not apply to a suit for redemption by the mortgagor and cl. (c) only applies
in those cases where the security is given after the commencement of the Usurious
Loans Act. [219 G] (4) The legal representatives were entitled to the benefit
of the Punjab Relief of Indebtedness Act. The application of s. 30 of the Act
does not depend upon the suit being one to which the Usurious Loans Act
applies. Even if the suit is not within the definition in s. 2(3) of the
Usurious, Loans Act by virtue of s. 30 of the Punjab Relief of Indebtedness
Act, the amount received by a creditor in excess of the amount due to him under
s. 3 (2) (e) 'of the Usurious Loans Act is liable to be deducted from twice the
amount actually advanced. [220 E] 214 (5) Section 30 uses the expression
"sum found by the court to have been 'actually advanced.' Such amount is
not the amount found by the court to be the amount due on taking account.
Therefore, the amount declared by the court as the amount due cannot be deemed
to be the amount actually advanced, and under s. 30, the-court cannot declare
any amount due under the mortgage which is in excess of twice the. amount
actually advanced less any amount received in excess of the amount due to the
creditor under s. 3(2)(e) the Usurious Loans Act. [220 HI
CIVIL APPELLATE JURISDICTION : Civil Appeals
Nos. 10 and 1 1 of 1966.
Appeals from the judgment and decree dated
May 23, 1961 of the Punjab High Court in Regular' First Appeals Nos. 184 of
1954 and 6 of 1955.
C. B. Agarwala and A. D. Mathur, for the
appellant, (in both the appeals).
K. L. Gosain, S. N. Goswami and P. C. Khanna.
for respondents Nos. 1 to 4 (in C.A. No. 10 of 1966) and respondents Nos. 1 to
6 (in S.A. No. II of 1966).
B. Datta, for respondent No. 18 (in C.A. No.
IO of 1966) and respondent No. 24 (in C.A. No. I 1 of 1966).
The Judgment of the Court was delivered by
Shah,J.-On July 20, 1896, Ladhia-grandfather of the respondents-borrowed Rs.
5,000 from Ramji Dass and as security for repayment thereof mortgaged with
possession certain agricultural lands and a house. The mortgage amount was to
carry interest at the rate of 12 annas per cent. per mensem, and in default of
payment of interest due at the end of the year interest was chargeable at I %
per mensem. On May 17, 1897, Ladhia executed in favour of Ramji Dass another
mortgage deed on the same properties for Rs. 800.
Interest under that mortgage was payable at
the rate of 2% per mensem. Ladhia executed a third mortgage deed in favour of
Ramji Dass on May 21, 1897, for Rs. 600. it included the properties in the two
earlier mortgages and 1/12th share in other lands and two houses. The
properties mortgaged in favour of Ramji Dass were subject to a previous
mortgage in favour of one Shugan Chand. Ramji Dass redeemed that mortgage on
payment of Rs. 650.
Lekh Ram -son of Ladhia filed a suit for
redemption of the three mortgages. On August 21, 1915, a preliminary mortgage
decree was passed in the suit by the Subordinate Judge, Hissar. declaring that
Rs. 62,293/11/9 were due on the mortgages. The High Court of Punjab confirmed
the decree on November 24, 1919. But no payment -was made under that decree,
nor was the decree made final.
215 Sometime in 1951 the representatives of
Ladhia applied under the Punjab Restitution of Mortgaged Lands Act, 1938, to
the Special Collector and obtained an order for restoration of the agricultural
lands. Thereafter the mortgages remained outstanding only on non-agricultural
properties. The representatives of Ladhia then instituted an action in the
Court of the Senior Subordinate Judge, Hissar, for redemption of the
non-agricultural properties, and claimed an account under s. 30 of the Punjab
Relief of Indebtedness Act, 1934, and -also of Usurious Loans Act, 1918, as
amended by the East Punjab Amendment Act 4 of 1948.
The representatives of the mortgagee
contended, inter`alia, that the suit was barred because no payment was made
pursuant to the preliminary decree in the earlier suit, that in any event it
was declared that the amount due in 1919 under the three mortgages was Rs.
62,293/11/9, and that decision operated as res judicata, and that account under
s.
30 of the Punjab Relief of Indebtedness Act should
'be taken on that footing.
The Trial Court held that the mortgage dues
were Rs. 7,050;
that the mortgagee had received Rs. 48,571 as
income during, the. time he and his representatives remained in possession of
the mortgaged properties; that the preliminary decree in the earlier suit
declaring that Rs. 62,293/11/9 were due operated as res judicata; -and that the
present action not being one for recovery of a loan,the rule of Damdupat
incorporated in s. 30 of the Punjab Relief of Indebtedness Act, 1934 had no
application; but s. 2 of the Usurious Loans Act, 1918, as amended by the East
Punjab Act 4 of 1948 applied. The Court held that the mortgagee was entitled,
besides Rs. 62,293/11/9 to Rs. 17,855/4/3 as interest on the three mortgages
and after giving credit for Rs. 48571 received as income, the balance due was
Rs. 31,578. The Trial Court accordingly passed a decree for redemption of the
properties in suit on payment of Rs. 31,578.
In the appeal filed by the parties to the
High Court of Punjab, two questions were referred to a Full Bench "1.
Whether it is open to the legal representatives of a debtor to invoke the help
of s. 30. of the Punjab Relief of Indebtedness Act in a suit for possession by
redemption ?
2. Whether the provisions contained in s. 3
of the Usurious Loans Act, 1918, as amended in the Punjab, would govern a suit
for redemption of mortgage executed before the commencement of the Act ?"
The Full Bench answered the first question in the affirmative, and the second
in the negative.
216 A Division Bench of the High Court then
held that under the principle of S. 30 of the Punjab Relief of Indebtedness
Act, the mortgagee's representatives were entitled to receive Rs. 14,100, being
double the amount due as mortgage debt, and Rs. 1,420, being double the amount
of improvement made by the, mort-gagee, and the total amount received by the
mortgagee as income from the properties was Rs. 45,022, and deducting.
therefrom Rs. 35,810 being the amount received in excess, the balance of Rs.
9,212 remained. A decree for redemption on payment of Rs. 6,308 (Rs. 15,520
less Rs. 9,212) was accordingly passed. Against the decree passed by the High
Court, these appeals have been preferred by the representatives of the
mortgagee with certificate granted by the High Court.
Three questions are raised in these appeals
(1) That S. 30 of the Punjab Relief of Indebtedness Act, 1934 -has no
application, because(a) there is no debt due; and (b) that a legal
representative of the original mortgagor cannot obtain the benefit of S. 30;
(2) That the judgment of the Division Bench
is inconsistent with the finding on the second question recorded by the Full
Bench; and (3) That the amount declared as due under the preliminary decree in
the earlier suit was for the purposes of s. 30 of the Punjab Relief of
Indebtedness Act the "amount actually advanced".
It is urged that s. 30 of the Punjab Relief
of Indebtedness Act, 1934, had no application, for the three mortgages being
usufructuary mortgages there is no debt due by the mortgagor, nor can the
mortgagee enforce recovery of any debt under the covenants of the mortgagees.
The first mortgage Ext. P-1 dated July 20, 1896 recited that the mortgagor
Ladhia had mortgaged with possession the properties set out therein for Rs.
5,000. The mortgage deed contained the following, amongst other, covenants :
"First :-Interest on the mortgage money
has been fixed at Re. -/12/per cent. per mensem.
Third :-I will be entitled to get from the
mortgagee the income accruing from the mortgaged property after deduction of
the Government revenues therefrom.
Fourth :-I will pay back the principal mortgage
money within a period of six years. In case of default, 217 of payment of the
whole or a part of it the mortgaged property shall be considered as foreclosed
in favour of the mortgagee..........
Fifth :-I will pay the interest year after
year. In case of default I will pay interest on the amount of interest also at
the rate of Re. 1/per cent. per mensem. The mortgagee shall also be competent
to file a separate suit regarding the amount of interest in Civil Court and
recover the same from me through it. I shall not have any objection thereto.
Seventh :-Till the principal mortgage money
and the interest are not paid off in full, temporary or permanent transfer of the
mortgaged property by me to anybody else shall 'be considered illegal and
invalid.
The mortgage deed Ext. P-2 dated May 17,
1897, for Rs. 800 contained similar covenants. It also recited that an amount
of Rs. 5,000 was borrowed under a deed dated July 20, 1896, and the mortgagor
agreed to repay the sum within six years with interest at the rate of Re. -/12/per
cent. per mensem. By the sixth clause it was provided :
"In case of default, viz., in default of
payment of the mortgage-money and interest along with the previous mortgage
money amounting to Rs. 5,000/(on the basis of the mortgage-deed) dated the 20th
of July, 1896, agreed to be paid back within a period of six years, the surplus
rights in the mortgaged property shall be considered as foreclosed and shall be
the absolute property of the mortgagee....." Exhibit P-3 dated May 21,
1897, also referred to the two earlier mortgages. By the first clause it
recited that the mortgage Money shall be paid back along with the mortgage
money due under the two earlier deeds of mortgage. The second clause referred
to the interest payable on the mortgage money at the rate of Rs. 2/per cent..
per mensem.
The sixth clause recited that till the entire
mortgage money -and interest are not paid off, the mortgagor will not transfer
by sale, mortgage or gift the mortgaged property to anybody else. The seventh
clause provides that the money paid by the mortgagor shall first be credited
towards the interest on the two earlier mortgages and the balance shall be
accounted towards the principal. By the eighth clause it was provided that the
mortgagor will pay interest on the mortgage money upto the date of redemption
of the mortgaged property.
Under the covenants in each of the deeds of
mortgage, there is a stipulated rate of interest payable by the mortgagor on
the L6SupCI/70-15 218 mortgage money and the amount recovered from the income
is to be first applied towards the interest and the balance towards the
principal. The mortgagee is also entitled to recover by suit interest accruing
due. The mortgages are clearly anomalous mortgages.
Section 7 of the Punjab Relief of
Indebtedness Act,. 1934, defines a 'debt' as inclusive of "all liabilities
of a debtor in cash or in kind, secured or unsecured, payable under a decree or
order of a civil court or otherwise, whether mature or not, . . . .
The definition of the expression 'debt'
therefore includes all liabilities of a debtor in cash or in kind, secured or
unsecured. The liability of a mortgagor to pay the money due, under the
mortgage and to pay interest accruing due is clearly a debt, even if it be assumed
that the mortgagee had no right to enforce the mortgage by sale of the property
and had a right only to foreclose the mortgages. Under the terms of the
mortgage deeds, if the mortgagor pays the amount due, the mortgagee is bound to
release the mortgaged property. It cannot be said that under the three
mortgages there was no debt due by the mortgagor. Nor do we agree with counsel
for the mortgagee that the benefit of S. 30 of the Punjab Relief of
Indebtedness Act is available only to the original mortgagor and not to his
representatives.
Section 30 of the Punjab Relief of
Indebtedness Act by the first sub-section provides "In any suit brought
after the commencement of this Act in respect of a debt as defined in section
7, advanced before the commencement of this Act no court shall pass or execute
a decree or give effect to an award in respect of such debt for a larger sum
than twice the amount of the sum found by the Court to have been actually
advanced, less any amount already received by a creditor in excess of the
amount due to him under clause (e) of sub-s. (2) of section 3 of the Usurious
Loans Act, 1918." A suit to redeem property on payment of the amount due
on the mortgage is a suit in respect of a debt; and the Court is by S. 30 of
the Act debarred from passing a decree for a sum larger than twice the amount
of the sum found by the Court to have been actually advanced. The section
imposes, a restriction, in certain conditions, upon the power of the Court. It
is the nature of the suit which decides the Court's jurisdiction : the section
makes no reference to the status of the party claiming relief except in so far
as the definition of debt involves such reference. On the plain words of the
section there is no warrant for the view that the jurisdiction of the Court is
attracted only when the person who incurred the obligation to pay the debt
personally is a party to the suit and not when his legal representative is a
party. An 219 obligation to pay a debt is not extinguished on the death of the
debtor. The obligation is enforceable against the estate of the debtor in the
hands of his legal representatives; and when it is so sought to be enforced, in
the absence of an express provision or clear intendment to the contrary, the
representatives may set up the defence which the original debtor could if he
had been sued have setup. The representatives of the mortgagor were therefore
rightly held entitled to the benefit of s. 30 of the Punjab Relief of
Indebtedness Act, 1934.
Each of the three mortgages created a debt
due 'by the mortgagor within the meaning of s. 7 of the Punjab Relief of
Indebtedness Act, 1934, and a suit filed by the representatives of the
mortgagor for redemption of the mortgages was a suit in respect of a debt
within the meaning of that section. A suit for redemption of a mortgage
executed before the commencement of the Usurious Loans Act, 1918, was however
not a suit to which the Act applied, and on that account the mortgagor could
not claim the benefit of that Act. Section 2(3) of the Usurious Loans Act
defines "suit to which this Act applies" as meaning any suit"(a)
for the recovery of a loan made whether before or after the commencement of
this Act; or (b) for the enforcement of any security taken or any agreement
whether by way of settlement of account or otherwise made, after the
commencement of this Act, in respect of any loan made either before or after
the commencement of this Act; or (c) for the redemption of any security given
after the commencement of this Act in respect of any loan made either before or
after the commencement of this Act." Evidently cls. (,a) and (b) of s.
2(3) have no application to a suit for redemption by the mortgagor, and cl. (c
also will not apply because the security was given before the commencement of
the Act. Clause (c) only applies in those cases of redemption of securities
given after the commencement of the Act in respect of any loan made either
before or after the commencement of the Act. The mortgagor's representatives were,
therefore, Dot entitled to claim the benefit of the Usurious Loans Act, 1918.
The mortgagor's representatives were still
entitled to the benefit of the Punjab Relief of Indebtedness Act. By s. 30(1)
of that Act in a suit filed in respect cl a debt, the Court is enjoined not to
pass a decree for a sum larger than twice the amount found by the Court to have
been actually advanced, less any amount 220 already received by a creditor in
excess of the amount due to him under cl. (e) of sub-S. (2) of S. 3 of the Usurious
Loans Act, 1918.
Clause (e) of sub-s. (2) of S. 3 of the Usurious
Loans Act was incorporated in that Act by S. 5 of the Punjab Relief of
Indebtedness Act. The clause reads :
"The Court shall deem interest to be
excessive if it exceeds seven and a half per centum per annum simple interest
or is more than two per centum over the Bank rate, whichever is higher at the
time of taking the loan, in the case of secured loans, or twelve and a half per
centum per annum simple interest in the case of unsecured loans :
Provided..............." There is
nothing in S. 30 of the Punjab Relief of Indebtedness Act which restricts the
benefit of deduction of amounts in excess of the amount due under cl. (e) of
sub-s.
(2) of S. 3 to those suits only to which the Usurious
Loans Act applies. The application of S. 30 of the Punjab Relief of
Indebtedness -Act does not depend upon the suit being one to which the Usurious
Loans Act applies. Even if the suit is not within the definition in S. 2(3) of
the Usurious Loans Act, by virtue of the express provisions of S. 30 of the
Punjab Relief of Indebtedness Act the amount received by a creditor in excess
of the amount due to him under cl. (e) of sub-s. (2) of S. 3 of the Usurious
Loans Act is liable to be deducted from twice the amount actually advanced. The
High Court was, therefore, right in directing that the amount received in
excess of the amount due under cl. (e) of sub-s. (2) of S. 3 of the Usurious
Loans Act was liable to be deducted from twice the amount actually advanced.
Counsel for the mortgagee's representatives'
contended that the decision of the Civil Court in the earlier suit for
redemption which declared -an amount of Rs. 62,293/11/9 due under the mortgages
must be deemed to be the amount actually advanced by the mortgagee. But the
decree in the earlier suit merely declared the amount due at the date when the
decree was passed : it did not adjudicate that the amount declared was the
amount actually advanced under the three mortgages.
The amount advanced under a mortgage is not
the amount found due on taking account of the mortgage. Section 30 uses the
expression sum found by the Court to have been actually advanced". If
apart from the terms of the Punjab Relief of Indebtedness Act, the mortgagor
war seeking an account of the mortgage dues, the previous adjudication may be
binding.
But the provisions of S. 30 of the Punjab
Relief of Indebtedness Act places an embargo upon the Court 221 declaring any
amount due under the mortgage which is in excess of twice the amount actually
advanced less any amount received in excess of the amount due to the creditor
under cl. (e) of sub-s. (2) of s. 3 of the Usurious Loans Act.
The Court, therefore, could not pass an order
directing payment of an amount larger than the amount which may be declared due
under s. 30 of the Punjab Relief of Indebtedness Act.
The appeals fail and are dismissed with
costs. One hearing fee.
R.K.P.S. Appeals dismissed.
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