Report No. 70
Deposit in Court
80.1. Section 83.- Section 83 provides-
"83. At any time after the principal money payable in respect of any mortgage has become due and before a suit for redemption of the mortgaged property is barred, the mortgagor, or any other person entitled to institute such suit, may deposit, in any Court in which he might have instituted such suit, to the account of the mortgagor, the amount due on the mortgage.
The Court shall thereupon cause written notice of the deposit to be served on the mortgagee and the mortgagee may, on presenting a petition (verified in manner prescribed by law for the verification of plaints) stating the amount then due on the mortgage, and his willingness to accept the money so deposited in full discharge of such amount, and on depositing in the same Court the mortgage-deed and all documents in his possession or power relating to the mortgaged property, apply for and receive the money, and the mortgage-deed and all such other documents, so deposited shall be delivered to the mortgagor or such other person as aforesaid.
Where the mortgagee is in possession of the mortgaged property, the Court shall, before paying to him the amount so deposited, direct him to deliver possession thereof to the mortgagor and at the cost of the mortgagor either to re-transfer the mortgaged property to the mortgagor or to such third person as the mortgagor may direct or to execute and (where the mortgage has been effected by a registered instrument), have registered an acknowledgment in writing that any right in derogation of the mortgagor's interest transferred to the mortgagee has been extinguished."
80.2. Institution of suit.-
If a suit for redemption is barred, the summary procedure for redemption is, of course, not available. But it is also not available, if the mortgagee has instituted a suit on his mortgage, and in that case the deposit would be treated as one made under Order 24, Rule 1, of the Code of Civil Procedure, 19081. This would be so even if the mortgagor had not received notice of the mortgagee's suit.2 A deposit in court pending a suit by the mortgagee was treated by the Privy Council as a deposit under Order 24, Rule 1 of the Code of Civil Procedure, 1908, in Shib Chandra v. Lachmi, (1929) 51 All 686: 56 IA 889: AIR 1929 PC 243.3
1. Thevarava Reddy v. Venkatachalam, (1917) 40 Mad 804; Brij Gopal v. Masuda Begam (Mst.), AIR 1935 Oudh 93.
2. Thiagaraja v. Ramaswamy, (1918) 95 Mad LJ 605.
3. Mulla, (1973), p. 567.
Thus, section 83 applies only to deposits made before a suit has been instituted on the mortgage, the general principle being that a tender of money must be made before the creditor institutes a suit for such money.1 Deposits into court after the institution of a suit by the creditor to recover a debt are governed by the provisions of Order 24 of the Code of Civil Procedure,2 even in the case of mortgage suits.3
1. 1963 Ker LT 1031 (1032); 1912 ILR 35 Mad 209 (212, 213) (DB); AIR 1939 Mad 200 (201).
2. 1963 Ker LT 1031 (1032);
AIR 1918 Mad 1360 (1362, 1363);
AIR 1919 Mad 948 (949).
3. AIR 1935 Oudh 93 (94, 95).
The fact that the mortgagor had no notice of the institution of the suit will not affect the right of the mortgagee to proceed with the suit as instituted.1
1. 1912 ILR 35 Mad 209 (214) (DB);
AIR 1919 Mad 948 (949).
80.5. The distinction between section 83 and Order 24 of the Code is that unless the entire amount due on the mortgage is deposited, interest does not, under this section, cease to run on the mortgage amount, whereas, under the provisions of Order 24, interest win cease to run on the amount deposited whether such sum is in full discharge of the claim or falls short thereof.
80.6. Effect of deposit.-
It is to be noted that a mere deposit by itself does not extinguish the mortgage.1 It will be extinguished only in two cases, namely-
(1) by the mortgagee accepting the deposit in full satisfaction of the daim,2 and
(2) by redemption of the mortgage by the mortgagor or other persons mentioned in section 91 in a suit for redemption.3
As to proposition (1), the contrary observations in an Allahabad judgment4 do not, with respect, appear to be correct.
1. AIR 1962 Mad 308 (309);
AIR 1960 Pat 51 (52);
AIR 1924 All 26 (28);
1907 ILR 34 Cal 223 (228);
1907 ILR 31 Born 527 (533);
AIR 1941 Cal 18 (19).
2. AIR 1945 Cal 370 (374); AIR 1941 Cal 18 (19).
3. AIR 1924 All 26 (28).
4. 1905 ILR 27 All 178 (181, 188).
80.7. Section 84.- Under section 84-
"When the mortgagor or such other person as aforesaid has tendered or deposited in court under section 83 the amount remaining due on the mortgage, interest on the principal money shall cease from the date of the tender, or (in the case of a deposit, where no previous tender of such amount has been made), as soon as the mortgagor or such other person as aforesaid has done all that has to be done by him to enable the mortgagee to take such amount out of court and the notice required by section 83 has been served on the mortgagee:
Provided that, where the mortgagor has deposited such amount without having made a previous tender thereof and has subsequently withdrawn the same or any part thereof, interest on the principal money shall be payable from the date of such withdrawal.
Nothing in this section or in section 83 shall be deemed to deprive the mortgagee of his right to interest when there exists a contract that he shall be entitled to reasonable notice before payment or tender of the mortgage money, and such notice has not been given before the making of the tender or deposit, as the case may be."
80.8. Quality of tender under section 84.-
It should be noted that there is some conflict of views as to the quality of tender required under section 84. Is continued readiness to pay essential? According to one view,1 it is necessary, even in the case of mortgage-debts, that the tender should be kept good, and that the mortgagor should not profit by the refusal of the tender by the mortgagee,2 where he (the mortgagor) does not keep the tender open.
A related question is whether deposit must follow tender. The Bombay High Court in Haji Abdul Rahman v. Haji Noor Mohammad, 1891 ILR 16 Bom 141, held that a plea of tender must be accompanied by a deposit in Court in order to stop the running of interest. The decision was, however, before this Act was made applicable to the Bombay Presidency.
A similar view was taken in Calcutta.3
The Madras High Court has, on the other hand, taken a different view. In Velayuda Naicker v. Haider Hussain Khan, ILR 33 Mad 1003, the mortgagor utilised for his own purpose the money tendered, after refusal by the mortgagee; it was contended on the strength of English authorities that the money must be kept ready for payment in order to stop the running of interest. The High Court held:
"We are bound by the terms of section 84 of the Transfer of property Act, and as already pointed out, under that section, "Interest shall cease from the date of tender". The word 'tender' does not, in itself, imply that he must have been always ready to pay the money."
Again, in a later case,4 the same High Court observed:
"It is clear from section 84, that, in mortgages, a tender alone has the effect of stopping interest from the date of the tender".
The Madras view may be correct on the language of the first paragraph of the section, as it is not provided expressly in the section that continued readiness to pay or deposit in Court following the tender is essential in order to stop interest from running.
1. ILR 34 Cal 223 (229).
2. AIR 1918 Mad 219.
3. (1903) 8 CWN 153.
4. Arunachalam Pillai v. Govindaswami, AIR 1932 Mad 109 (111).
While a deposit need not follow the tender in order to stop interest from the date of such tender, it seems just to provide that there must be continued readiness to pay in order that a tender may be valid for the purposes of section 84. It should be noted that the rule that the creditor is not entitled to interest where a valid tender of the amount by the debtor has been refused by him, rests upon the equitable consideration that the debtor who has lost the use of his money by reason of the conduct of the creditor, cannot, at the same time, be called upon to pay interest to the creditor.
Hence if the debtor does have the use of his money, the equitable consideration, does not apply and the mortgagee ought to be entitled to interest. In the first proviso to section 84, the principle stated above has been expressly recognised for the case of deposit. We are of the view that the first paragraph, in so far as it relates to tender, should also so provide. We recommend that it should be so amended.