Karnataka High Court
Kamalamma vs Ramabhadra Gupta on 1 July, 1987
Equivalent citations: ILR1988KAR20
JUDGMENT K.A. Swami, J.
1. This appeal by the plaintiff, as indigent person, is preferred against the judgment and decree dated 1-1-1986 passed by the learned XIII Additional City Civil Judge, Bangalore City, in O.S.No. 7330/ 1980 dismissing the suit filed for recovery of a sum of Rs. 60,595/- being the principal and interest due under the two mortgage deeds dated 1-12-1961 and 21-11-1962, with the notice charges of Rs. 150/-.
2. The trial Court has dismissed the suit on the ground that it is barred by time, even though, it has recorded a finding that the plaintiff is entitled to a decree for a sum of Rs. 6440/-.
3. Having regard to the contetions urged on both the sides, the following points arise for consideration in this appeal:
1) Whether the mortgages date 1-12-1961 (Ex.P. 1) and 21-11-1962 (Ex.P.3) are the usufructuary or anomalous mortgages?
2) What was the amount paid by the mortgagee to the mortgagors under the two mortgage deeds Ex. P. 1 and P. 3?
3) Whether the mortgage debt in question is binding on defendants 2 and 3?
4) Whether the suit is barred by time?
5) Whether the transactions in question attract the provisions of Mysore Usurious Loans Act 1923?
POINT No. 1:
4. The plaintiff is the assignee of the two mortgage deeds in question produced as Exs. P-1 and P-3. The original mortgagee was her husband Sri Subramanyam. He assigned the two mortgages in favour of his brother Venkateshwaran who in turn re-assigned the same to Subramanyam. Lastly Sri Subramanyam has assigned the mortgages in question under Ex. P-7 to his wife - the plaintiff. It is not in dispute that the plaintiff is the assignee and as such she is entitled to recover the mortgage money under, the two mortgages in question, as may be found due.
5.1 The case of the plaintiff is that on 1-12-1961, defendant-1 executed the mortgage deed - Ex.P. 1 on his behalf and also on behalf of defendants 2 and 3, who were minors then, as the kartha of the joint Hindu family on receiving a sum of Rs. 26,000/- from her husband, mortgaging the suit schedule property bearing Municipal No. 612 (formerly 521 and 329) situated in Anjaneya Temple Road Cross, Visweswarapuram, Bangalore City, as per the boundaries mentioned in the Schedule to the plaint. The execution of Ex.P-1 is not denied by defendant-1. However, there is a defence raised by the defendants that the amount received under Ex.P-1 was only Rs. 20,000/- and not Rs. 26,000/-. This will be considered under the second point.
5.2 On the same day i.e., on 1-12-1961, there was a lease deed executed by defendant-1 on his behalf and on behalf of his minor brothers (defendants 2 and 3) taking the motgaged property on lease on a rent of Rs. 250/- per month. This lease deed is not denied and it is marked as Ex.P-2. A few months later, another mortgage deed was executed by defendant-1 on his behalf and also on behalf of defendants 2 and 3 on 21-11-1962 on obtaining a sum of Rs. 5000/- in respect of the very same suit schedule property. This is also not disputed and this document is marked as Ex.P.3. On the same day, i.e., on 21-11-1962, there was another document executed by defendant-1 on his behalf and on behalf of defendants 2 and 3 as kartha of the joint family, evidencing lease back of the very same property on a rent of Rs. 312.50 per month. This document is marked as Ex.P.4. As a result of execution of Ex.P-4, the earlier lease as per Ex.P-1 ceased to operate though there is no reference to it in Ex.P-4. However there is a reference to Ex.P-1 (first mortgage) in Ex.P-4. The property is the same and the lessees and lessor are also the same, therefore on execution of Ex.P-4, the earlier lease Ex.P-2 ceased to operate.
5.3 The question for consideration is whether these transactions are usufructuary or anomalous mortgages. No doubt in both the deeds the mortgages are described as usufructuary mortgages. However, it is not a mere description of the mortgage that is determinative of the nature of the mortgage but the terms of the mortgage coupled with the contemporaneous document if any concerning the mortgage and the mortgaged property will be determinative of the nature of the mortgage. As per the terms contained in Ex.P-1 and P-3, the mortgagee has to remain in possession of the mortgaged property as security for repayment of the sums for which the two mortgages are executed. For the mortgage money, there is no interest stipulated. Clause 3 of the mortgage deed Ex.P-1 states that "the mortgagee shall be entitled to remain in possession of the said property and receive all rents and profits therein in lieu of the benefit for his investment of the said sum till the payment of the entire loan and the mortgagee shall not be liable to account for such rents and profits." Clause 4 further provides that the taxes and cesses payable in respect of the mortgaged property are to be paid by the mortgagors and in the event they fail to pay the same, it is left to the option of the mortgagee to pay the same and add it to the principal with interest at 9% per annum. Clause 5 provides that the mortgagors will at their own cost effect all such repairs to the mortgaged property as may be necessary from time to time and if they fail to do so, the mortgagee shall be entitled to effect such repairs and add such amount spent by him for such repairs with interest thereon at 9% per annum to the principal amount of the mortgage. Under Clause 6 the mortgagors have undertaken to repay the mortgage money together with all costs and charges. It also further provides that the mortgagors will not be entitled to redeem the mortgage until the expiration of 5 years from the date of the deed. Thus, the terms of the mortgages do not provide that the mortgagee has to account for the rents and profits received by him from the mortgaged property.
5.4 In the case of usufructuary mortgage, the mortgagee is authorised to retain possession of the mortgaged property until payment of the mortgage money and to receive the rents and profits from the mortgaged property or any part thereof and is entitled to appropriate the same towards the principal and the interest due under the mortgage. Thus in the case of usufructory mortgage, the mortgagee has to account for the rents and profits received by him from the mortgaged property. It may so happen that in course of time the mortgage money may stand satisfied and may some times it may be more than the mortgage money and in that event the mortgagee has to pay while returning the mortgaged property to the mortgagors, the excess amount of rent or profit received by him. In the case of mortgage with a contemporaneous document of lease back, forming part of one and the same transaction of mortgage, whereunder the lease amount approximately tallies with the rate of interest fixed on the amount paid under the mortgage or if no rate of interest is stipulated in the mortgage deed which enables the mortgagee to remain in possession of the mortgaged property until the mortgage money is paid and there is no liability on the mortgagor to account for the rents or profits received from the mortgaged property, further with a clog on the right of redemption followed almost simultaneously by a deed of lease back executed by the mortgagor and the rent received thereunder is either equivalent to or more than the rate of interest prevailing at that time, such mortgage is anomalous mortgage as the lease back is a part and parcel of the same transaction of mortgage, and it is only, a device to ensure payment of interest. The test is whether under the terms of the mortgage there is a liability on the mortgagee to account for the rents and profits received by him from the mortgaged property and whether leasing the mortgaged property back to the mortgagor is an independent transaction not forming part of the mortgage transaction. In the instant case, the rent fixed under Ex.P-2 and P-4, if worked out, would be equivalent to interest at 11% and if taken as Rs. 20,000/- it will work out to 15% interest. The amount of Rs.5,000/- advanced under the second mortgage, if taken into consideration, wilt work out to 12%. Having regard to the terms contained in the two mortgage deeds to which a detailed reference has already been made, and the two registered documents of lease, leasing the mortgaged property back to the mortgagors which have come into existence almost simultaneously immediately after the execution of the mortgage deeds attested by the very same witnesses who attested the mortgage deeds, the rent stipulated in them which is nothing but interest on mortgage money advanced under the two mortgage deeds in question, and having regard to the fact that the lease period also coincides with the period stipulated in the mortgage deeds during which the mortgagors are not entitled to redeem, as such they are not different transactions and they form part of the mortgages in question, and there is no liability on the mortgagee to account for the rents and profits received by him from the mortgaged property, - we are of the view that the mortgages question are anomalous mortgages. This view of ours also receives support from a Division Bench decision of this Court in - G. HAZARIMULL MULTHANMULL v. L.B. SIRDESAI, ILR (KARNATAKA) 1968, 1064. In para 9 of the said Judgment, it is held thus:
9. In the case before us, the mortgage deed and the lease back are executed on the same day and registered simultaneously having been presented for registration within a few minutes of each other. The drafts of the two documents were prepared at the time by the defendant's Advocate under the, instructions of defendants as admitted by the partner of defendant in his evidence. The witnesses to the documents are also the same persons. The rent of Rs. 500/- per month represents exactly 24 per cent per annum on the principal sum advanced. The mortgagee is a professional money-lender registered under the Mysore Money-lenders Act. The term of the tease deed, Exhibit P-41, is three years and the period stipulated in the mortgage deed after which the mortgagee is entitled to sue for the mortgage amount is also three years. If the rents are not paid regularly at the end of each month, during the term of lease, the mortgagee is entitled to terminate the lease forthwith without any further notice. If the mortgagee filed a suit for recovering the amount due to him after three years the mortgagor is liable to pay interest on the mortgage amount due till actual payment or realisation under the decree in such suit. Hence, we are of the opinion, considering all the circumstances of this case, that the two transactions of mortgage and lease should be considered to be parts of one and the same transaction and the lease deed is only a device to enforce the payment of interest on the mortgage loan, and rents should be regarded as interest on the mortgage loan."
Accordingly point No. 1 is answered as follows: The two mortgages in question are anomalous mortgages and not usufructuary mortgages.
POINT No. 2:
6.1 The trial Court has held that the amount advanced under the two mortgages in question is as mentioned in the deeds Ex.P-1 and P-3. We do not find much reasoning in the judgment of the learned trial Judge on this point.
We have been taken through the relevant evidence on this point. We are of the view that the learned trial Judge has ignored the material evidence on record.
6.2 Sri V. Tarakaram, learned counsel appearing for the appellant submits that there is an endorsement made by the sub-registrar to the effect that the mortagagors have received a sum of Rs. 26,000/- and the amount has been paid in his presence. It is submitted that this endorsement is prima facie proof of the fact that a sum of Rs. 26,000/- was paid to the mortgagors. Therefore, it is submitted that it is not open to the mortgagors to dontend that the amount received under the first mortgage was only Rs.20,000/-and not Rs.26,000/-as mentioned in the document.
6.3 No doubt, the endorsement made by the Sub Registrar under Sub-section (1) (c) of Section 58 read with Section 59 and Section 60(2) of the Registration Act, is prima facie evidence of payment of the amount mentioned therein. But it is not a conclusive evidence of receipt of consideration. It is merely prima facie evidence of the fact. The certificate by itself is admissible and no proof is necessary, to prove the said fact. Even the Sub Registrar need not be examined- to prove the genuineness of the certiicate. The endorsement made as per Section 58(1) of the Registration Act by Registering Officer affixing the date and his signature as per Section 59 thereof on a document endorsed as "registered" is admissible under sub--section (2) of Section 60 of the Registration Act for the purpose of proving that the facts mentioned in the endorsement have occurred as mentioned therein. Such endorsement can straight away be admitted and the genuineness of which is to be presumed under Section 79 of the Evidence Act. But nevertheless it is not conclusive proof. It is open to the party challenging it to lead evidence to contradict it and prove that what is stated in the certificate is not correct. That it is not conclusive is also further demonstrated by the proviso to Sub-section (1) of Section 92 of the Evidence Act which enables the parties to adduce oral evidence to show that there is failure of full or partial payment of the amount mentioned in the document. Therefore, we are of the view that it is not possible to accept the contention of Sri Tarakaram, learned counsel for the appellant that the certificate of the Sub Registrar on Ex. P-1 must be held to establish the fact conclusively, that the amount paid under Ex. P-1 was Rs. 26,000/-. Of course the certificate of the Sub Registrar may, in a case where there is no other evidence to show that the consideration paid is not as mentioned in the document, being prima facie evidence of the fact mentioned therein be sufficient to hold that the consideration as mentioned in the endorsement on the document by the Sub Registrar is paid. But in a case where there is other acceptable evidence to the effect that there is full or partial failure of consideration, the certificate of the Sub Registrar as to payment of consideration will not have much evidentiary value.
6.4 In the instant case, there is ample evidence adduced by the defendants to show that the amount advanced under Ex.P-1 was only Rs. 20,000/- and not Rs. 26,000/-. Ex.D.1 is a letter dated 24-1 2-1963 written by the husband of the plaintiff to the 1st defendant. On that day the husband of the plaintiff was the mortgagee and he assigned the mortgages in question in favour of one Venketeshwaran who is no other than the brother of Subramanyam. The assignment was tor a sum of Rs. 31,000/-. It is not in dispute that the 1st defendant was a witness to the document assigning the mortgages in question to Venkateshwaran. It was in this connection the husband of the plaintiff had written the letter Ex.D.1 which reads thus:
"B.V.R. GUPTA Vijayalakshmi Nivas
521/612, Anjaneya Temple
Street, Visweswarapuram,
Bangalore-4
Date: 24-12-63.
Dear Mr. Gupta,
I am to-day transferring the deed of Rs. 31,000/- to my brother Venkateswaran when the amount is settled, the difference due to you Rs. 6,000/- will be paid by me when please inform me the date of release.
Thanks.
Yours faithfully, Sd. N. Subramaniam."
This document clearly shows that what was paid under the two mortgages was not Rs. 31,000/- but it was only Rs. 25,000/-. As far as the amount paid under Ex.P-3 is concerned, there is no dispute that it was Rs. 5,000/-. Ex.D. 1 is referable to the amount advanced under Ex.P-1. In addition to this there is ample documentary evidence in/the form of entries in the account books maintained by the mortgagee--Sri Subramanyam and also income-tax returns' filed by him. These documents are marked as Ex.D.3 to D.18. In these documents, the debt relating to the two mortgages in question is mentioned. In respect of the first mortgage Ex.P-1 Rs. 20,000/- and in respect of the second mortgage Ex.P-3 Rs. 5,000/- are shown to have been advanced. The income tax returns were filed immediately after the two mortgages in question came to be executed. In the income-tax returns also the amounts advanced under the two mortgages Ex.P-1 and P-3 are shown as Rs. 20,000/- and Rs. 5,000/-respectively. The same had been repeated in the returns filed during subsequent years.
In addition to this, Sri Subramanyam has stated in his evidence thus:
"In the returns 1976-77, the amount of Rs. 25,000/- shown towards mortgage is under the request of defendant No. 1 as he had not shown the full amounts of loan in his business."
In respect of Ex.D.1, the explanation of Sri P. Subramanyam is found in para 16 of his deposition. He has stated thus:
"at the time of assignment of mortgage, to my brother he paid me only Rs. 25,000/- hence was a difference of Rs. 6,000/- due from him to me. That I wanted to inform to defendant No. 1. Instead of writing in the letter, the difference is the assignment to me I have erred as to you." I wanted my presence at the time of any settlement between D1 and my brother. For that reason, I have written the letter. I have no other document to show that my brother had paid only Rs. 25,000/- at the time of assignment."
If really Ex.D.1 was intended to explain the sum paid by Venkateshwaran to Subramanyam, there was no need 'to give such a letter to defendant-1. It became necessary to give such a letter to defendant No. 1 because as per the case of defendant-1, the sum paid was only Rs. 20,000/-whereas it was written as Rs. 26,000/- and defendant No. 1 was an attestor to the deed of assignment. Therefore, Ex.D. 1 was given by him to defendant-1. As already pointed out the income tax returns pertained to the year prior to 1963 came to be filed at an undisputed point of time. Thus by his consistent conduct, Sri P. Subramanyam has proved the case of the defendants that the amount advanced under Ex.P-1 was not Rs. 26,000/- but it was Rs. 20,000/- only. Hence taking into consideration all the material evidence having a bearing on the point we have no hesitation in holding that the defendants have proved that the consideration paid under Ex.P-1 was only Rs. 20,000/- and not Rs. 26,000/- as mentioned in the deed and the consideration paid under the second mortgage Ex.P-3 was undisputedly Rs. 5,000/-. Thus in all, under the two mortgages, Rs. 25,000/- was paid. Point No. 2 is answered accordingly.
POINT No. 3:
7.1 The third point for consideration is whether the mortgage debts in question are binding on defendants 2 and 3.
Sri Balasubramanyam, learned Counsel appearing for defendants 2 and 3 submits that defendants 2 and 3 were minors at the time the mortgage deeds in question were executed and defendant-1 being the brother was only a de-facto guardian and as such he was not competent to transfer the interest of the minors in the immoveable property which was mortgaged in favour of Subramanyam under Ex.P-1 and P-3. Hence, as far as defendants 2 and 3 are concerned, the transactions under Ex.P-1 and P-3 are void as against them and as such the same are not binding upon them.
In support of the above contention, learned Counsel has placed reliance on Section 11 of the Hindu Minority and Guardianship Act and also the decisions of the High Courts of Orissa, Madras and of this Court , Dancyi Gurumurthy v. Raghu Podan , Rajalakshmi v. Minor Ramachandran and 1971(2) Mys.L.J.164, Talari Erappa v. Muthyalappa.
7.2 At the outset it may be observed that the contention is not well founded. Obviously the contention fails to take into consideration the internal evidence contained in the case which militates against such contention. The contention also fails to take note of the power of the kartha of a Hindu Joint Family. The very mortgage deed Ex.P-1 is executed by defendant-1 as Manager of the joint Hindu family consisting of himself and his two brothers (defendants 2 and 3). Ex.P-1 further states that the property mortgaged was inherited by them through their father and that they were enjoying the same as a joint family property. The mortgage debt was incurred for the purpose of meeting the marriage expenses of their sister and also for the purpose of their joint family business. The relevant portions of the mortgage deed are as follows :
"This deed of Usufructuary mortgage or Bhogya executed on this the first day of December, one thousand nine hundred and sixty-one by B.V.Ramabhadra gupta, aged 25 years, son of late Sri B.H. Venkatappa Setty, Merchant, residing at No. Old 521, New 612, Anjaneya Temple Street, Visweswarapuram, Bangalore City for himself and as Manager of the joint Hindu family consisting of himself and his minor brothers B.V. Vijayendra Gupta aged 13 years and B.V. Bhaskar Gupta, aged 11 years, hereinafter called the 'Mortgagors' in favour N.Subramanyam son of P.R. Narayana Iyer, Chemist, residing at No. 10, Susheela Road. Mavalli. Bangalore City, hereinafter called the 'Mortgagee' witnesseth as follows :
Whereas the Mortgagors, namely, B.V. Ramachandra Gupta and his minor brothers B.V.Vijayendra Gupta and B.V.Bhaskar Gupta form a joint Hindu family of which the said B.V. Ramachandra Gupta is the manager.
Whereas the immoveable property described in the schedule hereunder written was the self acquisition of B.H.Venkatappa Setty, he having purchased the same from K. Rama Rao, K. Srinivas Rao, as evidenced by the Sale Deed dated 5-7-1946 and registered as No. 465 of Book I, Volume 808 pages 93 to 98 of the Bangalore City Sub-Registrar's office, and he died in the year 1955.
Whereas the Mortgagors abovenamed became entitled to the said property by succession on the death of their father and the same is an ancestral property in their hands.
Whereas the said B.H.Venkatappa Setty was carrying on Mandi trade during his life time and the said trade is the joint family business of the mortgagors and is the main source of livelihood and the said B.V.Ramabhadra Gupta is the Manager of the said business.
Whereas for the expenses of the marriage of the 1st mortgagor which took place about 5 months ago, a large portion of the capital of the said Mandi business was utilised and for this reason also and owing to the rise in the prices of commodities in which the said Mandi deals, there is pressing necessity for additional capital for the Mandi business;
Whereas the family is in need of Rs. 10,000/- (Rupees Ten thousand only) for celebrating the marriage of the Mortgagor's sister B.V. Shanta who is now 20 years old;
Whereas the said B.V.Ramabhadra Gupta having applied to the mortgagee for a loan of Rs. 26,000/- (Rupees twenty six thousand) on the 'Bhogya' of the property described in the. schedule hereunder written and the mortgagee has agreed to lend the said sum on the terms and conditions hereinafter set-forth."
The second mortgage deed Ex.P.3 also contains similar recitals. In the light of these recitals, it is not possible to hold that the mortgage debts were not incurred for and on behalf of the joint family by the 1st defendant as a Manager of the joint Hindu family consisting of himself and defendants 2 and 3 for the purpose of meeting joint family commitments and for joint family business. The contention ignores this unimpeachable evidence.
7.3 In the case of a Manager of a joint Hindu family consisting of minor members, the power of the Manager is not curtailed by the Hindu Minority and Guardianship Act. Section 12 of the Act specifically provides that where a minor has an undivided interest in joint family property and the property is under the management of the adult member of the family, no guardian shall be appointed for the minor in respect of such undivided interest, provided that nothing in the Section shall be deemed to affect the jurisdiction of a high Court to appoint a guardian in respect of such interest. The recitals contained in the two mortgage deeds, clearly establish that the mortgaged property is a joint family property. Further it is not the case of defendants 2 and 3 that the mortgaged property is not a joint family property. As far as defendant-1 is concerned, he does not dispute that he executed both the mortgages as the kartha of the joint Hindu family consisting of himself and his two brothers who are defendants 2 and 3. Thus, defendant-1 has not executed the two mortgages in question as a de-facto guardian of defendants 2 and 3 but he has executed them as the kartha of the joint Hindu family consisting of himself and defendants 2 and 3. It is also very pertinent to notice that defendants 2 and 3 have not challenged the mortgage transactions on the grounds that they were not made either for legal necessity or for the benefit of the estate. The Manager of a joint Hindu family undoubtedly possesses authority to alienate the property of the joint family consisting of even minor members and incur a debt or liability or admit a liability on behalf of the joint family, so as to bind minor members of the joint family provided it is made or incurred either for legal necessity or for the benefit of the estate. He also enjoys similar authority while conducting joint family business to mortgage, or to sell the joint family property for a legitimate and proper purpose of the business. (See paras 241, 242 and 246 of Hindu Law by Mulla 15th Edition). Thus it is clear that the 1st defendant as the Manager of the joint Hindu family consisting of himself and defendants 2 and 3 acted well within his authority in incurring mortgage debts in question and the same are binding on defendants 2 and 3 as they have not challenged these debts on the grounds that they were incurred neither for legal necessity nor for the benefit of the estate nor for the legitimate and proper purpose of the joint family business.
7.4 In this view of the matter the aforesaid three decisions relied upon by learned Counsel Sri Bala-subramanyam which relate to acts of de-facto guardian of a minor, are not relevant and as such it is not necessary to consider them in greater detail.
7.5 In addition to this, both the sides have relied upon a registered deed of partition dated 16-9-1983 which is produced as additional evidence before this Court to which defendants 1 to 3 are parties. Under this document the defendants 1 to 3 have divided their joint family properties. The suit mortgages are also referred to in this partition deed and in para 6 of the partition deed relating to suit mortgages, it is stated thus:
"6(a). That all the parties affirm that Smt. Kamalamma was instituted legal proceedings in O.S.No. 7330/80 on the file of the Court of Bangalore City Civil Court (CCH. No. 12) against the first member of the first party, second party and the first member of the third party for the recovery of Rs. 60.595/- as on 30-5-1980 on the basis of the registered deeds of mortgage dated 1-2-1961 and 21-11-1962 and the parties are contesting the said proceedings.
(b) That all the parties affirm that Smt. Kamalamma's husband Sri N. Subramanyam has instituted O.S. No. 7331/80 on the file of the Court of Bangalore City Civil Court only against Sri B.V. Ramabhadra Gupta for the recovery of the amount of Rs. 22,855/- on the basis of pronotes alleged to have been executed by him and the said proceedings are being contested.
(c) Therefore, the amounts mentioned in the 4th and 5th items of the Schedule 'A' property shall continue to remain in the joint account of the first member of the first party and the first member of the third party wherein the members of the first party and the members of the third party shall have equal rights so that it may be utilised for discharging the liabilities arising in the suits O.S. No. 7330/80 and O.S. No. 7331/80 on the file of the Bangalore City Civil Court (CCH No. 12) and if the decretal amounts were to exceed, the amounts and deposits mentioned in the 4th and 5th items of the Schedule-A property then the excess liability arising therefrom shall be shared equally between the members of the first party and the members of the Third Party. That in the event of the said suit being dismissed or the amounts that may be payable under the said suit being dismissed or the amounts that may be payable under the said decrees being less than the amounts so deposited mentioned in the 4th and 5th items of the schedule-A then all, such excess amounts, if any, shall be equally shared by the members of the 1st party and third party."
7.6 Further, defendants 2 and 3, after attaining majority, have not challenged the two mortgages in question within the period permitted under the Limitation Act. Thus from what is discussed above, it is clear that the two mortgage debts in question were incurred by the 1st defendant as a Manager of the joint Hindu family for and on behalf of defendants 2 and 3 for legal necessity as well as for the purpose of joint family business as mentioned in the documents (Ex.P-1 and P-3). Consequently it follows that defendants 2 and 3 are bound by the mortgage debts along with defendant-1. Point No. 3 is answered accordingly.
POINT No. 4 : --
8. The suit is filed on 30-5-1980. The case of the defendants is that the two mortgage deeds in question were executed on 1-12-1961 and 21-11-1.962; that the suit being the one for recovery of mortgage money it is governed by Article 62 of the Limitation Act 1 963 and as such it ought to have been filed within 12 years from the date the mortgage money become due. Under the first mortgage, the period fixed for redemption of mortgage is 5 years from the date of the mortgage. Therefore, the mortgage money became due on 1-12-1966. Similarly under the second mortgage, the period fixed for redemption is 4 years. Therefore, the mortgage money became due under the second mortgage on 21-11-1966. Therefore, the contention of the defendants is that 12 years from those dates had expired much earlier to 31-12-1980, hence the suit is barred by time.
9.1 If these are the only facts involved in the case, we would not have had any hesitation in deciding this point in favour of the defendants. But there are certain other admitted facts which go in favour of the plaintiff and bring the suit well within time.
9.2 Even according to the case of the defendants, the rent fixed under the two lease deeds are only a device to recover the interest on the amount advanced under the two suit mortgages and the same has been paid upto 1-2-1980. In para-13 of the written statement, of the 1st defendant, it is stated thus:
"13. This defendant submits that himself and the other defendants are the tenants under one Shri N. Subramanyam, the husband of the plaintiff herein on a monthly rent of Rs.250/- and they have paid rents to him upto 1 -2-1980. Subsequently rents have not been received by the said person."
There is a no due certificate given by Sri N. Subramanyam, P.W.1, the husband of the plaintiff on 1-10-1979 as per Ex.D-2 acknowledging that the 1st defendant has paid rent upto-date at the rate of Rs.250/- per month as per the lease deed executed in the year 1961 in respect of the mortgaged property. This certificate dated 1-10-1979 proves that the rent has been paid by defendant - 1 upto 1-10-1979. It is contended that a mere payment of rent even if the rent really represented interest on the amount advanced under the two mortgages did not and cannot be held to, satisfy the requirement of Section 19 of the Limitation Act 1963. Therefore on the basis of Ex.D-2 the suit cannot be held to be in time. Learned Counsel further submits that in addition to payment of rent or interest by the defendants or defendant No. 1 there must have been an acknowledgement in writing and signed by the defendants or defendant N.o.1 acknowledging the mortgage debts before the filing of the suit and as there is no such acknowledgement Ex.D-2 cannot be relied upon to extend the period of limitation. In support of the contention learned Counsel, has placed reliance on a decision of the Supreme Court in SANT LAL MAHTON v. KAMALA PRASAD AND OTHERS, - Sant Lal v. Kamala Prasad. In this decision the Supreme Court has considered Section 20 of the Limitation Act 1908 which is equivalent to Section 19 of the Limitation Act 1963. A mere payment on account of a debt or of interest before the expiration of the prescribed period of limitation by the person liable to pay the debt is not sufficient to extend the period of limitation under Section 19 of the Act ; it must be followed by an acknowledgment of the payment in writing and signed by the person making the payment. In the aforesaid decision while considering Section 20 of the Limitation Act 1908 which corresponds to Section 19 of the Limitation Act 1963, it is held thus:
"8, Admittedly in the case before us, none of the payments specified above were endorsed on the bond itself and there was no acknowledgment either in the hand writing of, or signed by, the debtors prior to the instituion of the suit. What the Subordinate Judge relied upon, is the admission contained in paragraph 15 of the written statement filed on behalf of defendants 1 to 3 in the present suit where these defendants admitted not only that the payments specified in the plaint were actually made on the respective dates but asserted that there were other payments besides these, which reduced the debt still further and for which the plaintiffs did not give any credit to the defendants. In the opinion of the Subordinate Judge as the written statement was signed by these defendants, it would fulfil all the requirements of a signed acknowledgment as is contemplated by the proviso to Section 20. The short point for our consideration is : whether the view taken by the Subordinate Judge is correct?
9. It would be clear, we think, from the language of Section 20 of the Limitation Act that to attract its operation two conditions are essential : first, the payment must be made within the prescribed period of limitaion and secondly, it must be acknowledged by some form of writing either in the handwriting of the payer himself or signed by him. We agree with the Subordinate Judge that it is the payment which really extends the period of limitation under Section 20 of the Limitation Act ; but the payment has got to be proved in a particular way and for reasons of policy the legislature insists on a written or signed acknowledgment as the only proof of payment and excludes oral testimony. Unless, therefore, there is acknowledgment in the required form, the payment by itself is of no avail. The Subordinate Judge, however, is right in holding that while the section requires that the payment should be made within the period of limitation, it does not require that the acknowledgment should also be made within that period. To interpret the proviso in that way would be to import into it certain words which do not occur there. This is the view taken by almost all the High Courts in India and to us it seems to be a proper view to take.
10. But while it is not necessary that the written acknowledgment should be made prior to the expiry of the period of limitation, it is, in our opinion, essential that such acknowledgment, whether made before or after the period of limitation, must be in existence prior to the institution of the suit. Whether a suit is time-barred or not has got to be determined exclusively with reference to the date on which the plaint is filed, and the allegations made therein.
To claim exemption under Section 20 of the Limitaion Act the plaintiff must be in a position to allege and prove not only that there was payment of interest on a debt or part payment of the principal, but that such payment had been acknowledged in writing in the manner contemplated by that section. The ground, of exemption is not complete without this second element, and unless both these elements are proved to exist at the date of the filling of the plaint the suit would be held, to be time barred. XX XX XX"
In the instant case though the payment of rent representing interest on the amount advanced under the two mortgages upto February 1977 is admitted by the plaintiff, there is no acknowledgement of the payment by defendent No. 1 or by all the defendants. Therefore, it is not possible to hold that (SIC)thf plaintiff is entitled to claim benefit to extended period of limitation under Section 19 of the Limitation Act, 1963.
9.3 However, there is another document dated 25-2-1977 in the form of a letter written by defendant No. 1 and addressed to the plaintiff seeking time for payment of the mortgage amount due under the two mortgages in question. It reads thus:
"To Dt :25-2-77 Smt. Kamalamma, W/o N. Subramanyam, 4/1, Devan Madhava Rao Road, Basavanagudi, Bangalore. Madam,
Ref : Usufructuary mortgage deeds executed by us in favour of your husband under Regd., deeds Nos.4005 dt. 61-62 and 7-12-61 and - 4037/62-63 dt. 28-11-62 - and final assignment to you as per Regd. deed No. 164 of 6-9-70 in page 100/102 volume 798 Book I dt. 18-4-69.
As we need the loans taken under the above deeds for a further period of five years from this 25-2-77 in confirmation of our personal request, you may allow us to retain the loan for another 5 years, and confirm to enjoy the facilities from the property as per originals of U.M. deeds.
Also the same may be leased to us for a rent of Rs.755/-as agreed between us until this amount as per this deed is discharged by us and taken possession thereof.
Yours Sincerely, Sd/-
BVR Gupta."
However, defendant-1 in his evidence has feigned ignorance about the writing of this letter by him.
Therefore, the said document was referred to the handwriting expert who is examined as P.W.2. The report of the handwriting expert is marked as Ex.P.9. We have been taken through the evidence of P.W.2 and also her report. A good number of reasons are given in support of her opinion that the document referred to her was the one which was written by defendant-1. Similarities between the. admitted writing and the writing contained in the disputed document have been pointed out. In the cross-examination the evidence of this witness has not been shaken Therefore, we do not see any justification to reject the evidence of P.W.2 and the document. The learned Judge, it is noticed, has not marked this document. We are inclined to think that it was not marked by oversight as otherwise there was no necessity to refer it to the handwriting expert and receive her opinion and examine her in the suit. Hence we take this letter into consideration. It is marked as Ex.P-9.
The contents of this document Ex.P-9 show that defendant-1 who was the kartha of the Joint Hindu Family at that time sought for further period of 5 years from 25-2-1977 for payment of the amount due under the two mortgage deeds. This document Ex.P-9 is an acknowledgment of liability and it squarely falls under Section 18 of the Limitation Act 1963. The words used in Section 18 of the Limitation Act 1963 are "in respect of any property or right". These words are wide enough to include or take into their fold, the acknowledgement relating to any property or right which is the subject matter of suit. Therefore the acknowledgement Ex.P-9 falls under Section 18 of the Limitation Act 1963. The document Ex.P-9 satisfies all the requirements of an acknowledgment falling under Section 18 of the Limitation Act, 1963. It is made by the person liable to pay the mortgage money as kartha of the joint family. It is made to the assignee of the mortgages. It acknowledges the mortgage debt in clear and unequivocal terms and seeks time for payment. It is made before the expiry of the period of limitation, in other words during the period of subsistence of the liability. This acknowledgement evidenced by Ex.P-9 binds defendants 2 and 3 also as it is made by defendant No. 1 as the kartha of the joint family consisting of himself and his brothers-defendants 2 and 3. As such it falls under Clause (b) of Subsection (3) of Section 20 of the Limitation Act 1963 and it must be deemed to have been made on behalf of the whole family. Therefore it binds defendants 2 and 3 also.
In this regard, it is contended by Sri Balasubramanyam, learned Counsel for defendants 2 and 3 that the provisions of Rule 6 of Order VII C.P.C. are not complied with.
It is further submitted that Rule 6 of Order VII requires that in a case where the suit is prima facie barred by time, the plaintiff has to explain in the plaint in what manner the suit is in time or in other words the grounds upon which the extension of limitation is claimed, that in the absence of such an explanation it must necessarily lead to rejection of the plaint. It is not possible to accept this contention. No doubt if the cause of action is apparently barred by time, as per Rule 6 Order VII of the C.P.C. the plaintiff is required to state specifically in the plaint the grounds on which he seeks the extended period of limitation. The question for consideration is whether absence of any such specific ground in the plaint either leads to rejection of plaint or disables the plaintiff from claiming the benefit of extended period of limitation. Absence of specific statement in the plaint as to grounds of exemption from limitation law does not necessarily lead to rejection of plaint. The Court is required to construe the plaint as a whole and find out whether relevant facts are found in the plaint and the records produced along with the plaint. If the contents of the plaint read as whole and the records produced spell out an explanation as to how the suit is in time, the mere fact that there is no specific statement or explanation as to how the plaintiff claims an extended period of limitation, is not fatal to the suit. From this it also follows that absence of specific statement in the plaint as to how the right of action is not barred by time also does not disable the plaintiff from proving the same, if, as already pointed out such facts can be gathered from the plaint read as a whole and the records produced in the suit. The substance of the plaint averments and the records produced in the suit having a bearing on the extended period of limitation are to be taken into consideration. What is necessary is that the relevant facts must be in existence at or before the suit is instituted.
In para 5 of the plaint, the plaintiff has stated that defendant-1 sought for extension of time for payment of the amount. Though she was not bound to agree, but nevertheless, on his request, she agreed for extention of time. This statement is referable to the document Ex.P-9 which has been proved by the evidence of the handwriting expert to which we have already adverted to. Therefore, it is not possible to hold that the plaint does not satisfy Rule 6 of Order VII C.P.C. It is sufficient if there is substantial compliance with the rule. The Rule is satisfied if the relevant facts showing exemption from the prescribed period of limitation or in otherwords claiming extended period of limitation are mentioned in the plaint. In CHOWA MEHTO & OTHERS v. JNANI RAM AND ANOTHER, and BINODILAL v. SATYENDRA SINGH, AIR 1956 M.B 97 it has been that if the facts are apparent on the face of the records, so as to enable the plaintiff to claim extension of limitation, there will be a substantial compliance with Rule 6 of Order VII C.P.C. In addition to this it is a settled rule of interpretation that rules of procedure are to be construed liberally and in such a manner so as to render the enforcement of substantive rights effective. The procedure is, after all, the handmaid and not mistress of justice (See N.T. VELUSWAMI THEVAR v. G. RAJU NAINAR, ) . Thus we are of the view the contention of Sri Balasubramanyam that there is non-compliance with Rule 6 of Order VII of C.P.C. does not deserve acceptance. It is accordingly rejected.
9.4 Thus as pointed above, Ex.P-9 dated 25-2-1977 which is an acknowledgement of the mortgage debt made within the period of limitation by defendant No. 1 as the kartha of the joint family, falls under Section 18 of the Limitation Act 1963 and having regard to the provisions contained in Clause (b) of Sub-section (3) of Section 20 of the Limitation Act, 1963 binds defendants 2 and 3 also. The suit is filed within 12 years from 25-2-1977 and as such the suit is within time. The learned trial Judge is not justified in holding that the suit is barred by time. Accordingly, point No. 4 is answered in the affirmative and in favour of the plaintiff.
POINT No. 5 :
10. It has already been held that the mortgages in question are not usufructuary mortgages but are anomalous mortgages. The mortgage transactions in question fall within the ambit of the definition of the expression 'Loan' as defined in the Mysore Usurious Loans Act, 1923 (hereinafter referred to as 'Mysore Act IX of 1923'). According to Sub-section (2) of Section 2 of the Mysore Act IX of 1923, 'loan' means a loan whether of money or in kind and includes any transaction which is, in the opinion of the Court in substance a loan. It does not require much reasoning to hold that mortgage amount in-question is a loan because a mortgage is the transfer of an interest in specific immoveable properties for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt or the performance of an engagement which may give rise to a pecuniary liability .Thus in a transaction of mortgage there is relationship of a creditor and a debtor and the mortgage money is a debt secured. Therefore, the mortgage transactions in question satisfy the definition of loan as defined in Mysore Act IX of 1923.
11. The next question for consideration is whether Mysore Act IX of 1923 applies to the suit in question. Subsection (3) of Section 3 of Mysore Act IX of 1923 defines the words 'suit to which the Act applies'. According to Clause (a) thereof, Mysore Act IX of 1923 applies to any suit filed for the recovery of a loan made after the commencement of Mysore Act IX of 1923. Clause (b) thereof is not relevant for our purpose. The present suit is filed by the creditor for recovery of the loan amount advanced under the two mortgages in question. The loan is incurred after the commencement of Mysore Act IX of 1923. Therefore, it is held that Mysore Act IX of 1923 applies to the suit in question.
12. The next question for consideration is whether the two mortgage transactions in question as between the parties were substantially unfair so as to attract the provisions of Section 3 of Mysore Act IX of 1923. It is contended on belhalf of the plaintiff that the trasactions in question being simple transactions of mortgage, there is no reason to belive that they were between the parties substantially unfair; that the mortgaged property was leased back to the mortgagors on a rent which represented interest on the amount advanced under the mortgages and as such there was nothing either unfair or substantially unfair in the transactions. It is pertinent to recollect, as already pointed out that under the transaction evidenced by Ex.P.1, the amount advanced was not Rs. 26,000/-, whereas it was only Rs. 20,000/-. The rate of rent fixed under Ex.P.2 was Rs. 250/- which represented the interest on the sum of Rs. 20,000/-. The fact that the mortgage deed was taken for a higher sum than actually advanced which was a substantial amount i.e., Rs. 6,000/- itself was one of the circumstances to show that the transaction was substantially unfair. In addition to this, the rate of interest was also excessive. Under the second mortgage, a sum of Rs. 5,000/- was paid and the lease deed provided for payment of rent at the rate of Rs. 312--50 per month. If the interest is calculated from 21-11-1962 on the total sum of Rs. 25,000/-at the rate of 12 percent per annum, it comes to Rs. 3,000/-. The rate of rent under Ex.P.2 was Rs. 250/- per month. Thus the rent for one year also Rs. 3,000/-. It is not disputed that in spite of Ex.P.4, the rent was being paid only at the rate of Rs.250/- per month. There is no evidence on record to show as to what was the rate of interest on lending of money during the year 1961 or 1962. However there are several judicial precedents; therefore, we are of the view that we can safely rely upon those precedents and decide the case instead of remitting it only for this purpose.
In VARADACHARIAR AND OTHERS v. GOPALA MENON AND OTHERS, the Supreme Court was concerned with the transactions of the year 1936 and 1938. Considering the case under the provisions of the Madras Usurious Loans Act, 1918 (Central Act), the Court in para 9 and 11 of the Judgment observed thus:
"There can be no dispute that interest that payable at the rate of 10 per cent compoundable annually over a number of years would be more in the interest of the creditor than 12 per cent per annum simple for the same period. In our opinion the learned judges of the Division Bench of the Madras High Court were right in holding that 10 per cent compound interest with yearly rests would meet the justice of the case. The security was not adequate and the threat of suit by Alavandar in view of the fact that his earler suit which had been taken in appeal to the Madras High Court and subsequently lost was never regarded seriously. This is corroborated by the fact that even after the institution of that suit in 1937, the appellant before advanced further sums of money to Dhanakoti Ammal at the same rate of interest as before. If he had thought that his security was put in jeopardy by the institution of the suit, he would have been careful not to advance any further amounts and would in any case have insisted on the rate of interest being higher than that provided for in the earlier mortgages.
"11. We also find no reason to interfere with the scaling down of the rate of interest to 6 per cent from the date of the filing of the suit. Although reasons are not indicated, it seems fairly plain that Their Lordships were using their descretion as regards interest pendente lite. We cannot overlook the fact that the mortgages were executed as far back as 1936 and 1938 and that the creditor who had waited till 1950 for the institution of the suit would in any event get interest substantially exceeding the principal amount of the loans. In this view of things, we are not prepared to interfere with the exercise of the discretion exercised by the learned High Court Judges of the Madras High Court even though they have given no reasons for the reduction of the rate of interest pendente lite."
Again in S.RAJAGOPALASWAMI NAIDU v. THE BANK OF KARAIKUDI LTD, it was observed thus:
" On the question of interest we are of the view in the light of the provisions of the mortgage deed and all the circumstances that the rate of 12% is unfair and penal. We are inclined, therefore, to give this relief that the interest should be calculated at the rate of 10% (which was the original contractual rate) from the date of the mortgage to the date of the preliminary decree. Thereafter the interest shall be payable as directed by the trial court at the rate of 6% per annum till realisation."
In the aforesaid case, the Supreme Court was concerned with the mortgage transaction of the year 1950. In the present case, we are concerned with the transactions of the years 1961 and 1962. Having regard to the fact that the security for the loan advanced was adequate and the payment of interest on every month in the form of rent was ensured, and no risk whatever was involved, the interest at the rate of 12 per cent per annum was excessive and substantially unfair. Having regard to the fact that the rent was being paid every month, the interest worked out more than 12 per cent per annum inasmuch as instead of paying Rs. 3,000/- towards interest at the end of the year, it was paid at the rate of Rs. 250/- per month which worked out to more than 12 per cent per annum. Thus the interest was excessive. Therefore, we are satisfied that the transacions in question as between the parties were substantially unfair. As per Explanation I to Sub-section (1) of Section 3 of Mysore Act IX of 1923 if the interest is excessive, the Court shall presume that the transaction was substantially unfair In view of the fact that the rate of interest has been on the increase year-after-year, it appears to us that the rate of interest at 11% per annum during the year 1961 and 1962 from the date of the mortgage in the facts and circumstances of the case would have been reasonable.
13. In view of the above conclusion, it appears to us that the transaction was substantially unfair between the parties. In addition to this, it is already pointed out that there was also a substantial difference between the principal amount actually advanced and the amount as entered in the mortgage deed Ex.P. 1. At this stage it is also necessary to advert to the contention of Sri Tarakaram, learned Counsel for the plaintiff that the defendants have not specifically pleaded that interest was excessive and the transaction was substantially unfair. Learned Counsel has also placed reliance on decision of the Federal Court reported in GIRWAR PRASAD NARAIN SINGH v. GANESHLAL SARAOGI, AIR 1949 FC 57 'The following observations therein were relied upon :
" In order to be entitled to the benefit of the Usurious Loans Act 1918, the appellant must establish (1) that the interest payable on the loan is excessive ; and (2) that the transaction was, as between the parties thereto, substantially unfair."
The aforesaid decision of the Federal Court was rendered on 26th November 1948. Subsequent to that, the Mysore Act IX of 1923 has been amended. Explanation I has been inserted by Act No. XIV of 55, in Sub-section (1) of Section 3 of Mysore Act IX of 1923. The said Explanation reads thus:
"If the interest is excessive, the Court shall presume that the transaction was substantially unfair, but such presumption may be rebutted by proof of special circumstances justifying the rate of interest."
Thus in view of the aforesaid explanation if it is proved that the rate of interest was excessive, the Court has no option but to presume that the transaction was substantially unfair. However, it is a rebuttable presumption. It is open to the creditor who brings the suit for recovery of the loan to prove special circumstances to justify the higher rate of interest. No special circumstance, in the instant case, is proved. On the contrary, it is already pointed out that no risk whatever was involved in the transactions. Security was adequate. Payment of interest on every month in the form of rent was insured. Thus there was no justification for the higher rate of interest. Thus the interest rate was excessive. Hence in the light of Explanation I the transactions in questin between the parties were substantially unfair. Therefore, for the reasons stated above, we are of the view that the provisions of Section 3 of Mysore Act IX of 1923 are attracted to the mortgage transactions in question. Therefore, it is necessary to scale down the interest. Accordingly, Point No. 5 is answered in the affirmative.
14. Learned Counsel for the 1st defendant and the plaintiff have filed a joint memo of calculations dated 2-7-1987 working out the interest at the rate of 11% per annum from the date of the transaction up to the date of suit and 9% from the date of the suit till 1-7-1987. The said memo of calculation is as follows:
"1 Interest paid at Rs. 250/- from 1-12-61 to 1-10-79.(17 years 10 months) Rs. 53,500-00
2. Interest payable at 11% on the principal of Rs. 20.000/- from 1-12-61 to 21-11-62 (11 months 21 days = Rs. 2,139-00 Interest payable at 11% on the principal of Rs. 25.000/- from 22-11-62 to 30-5-80 (17 years 6 months and 9 days) = Rs.
48, 187-00 Rs. 50,326-00 Excess payment 3,174-00
3. After adjusting excess payment of Rs.
3,129-00 out of principal of Rs.25,000/-, the balance principal on the date of suit will be = Rs. 25, 000-00 = Rs, 3,174-00
-----------------
Rs.21,826-00 Rs.21,826-00
4. Interest at 9% p.a. from 1-6-80 to 1-7-87 on Rs. 21,826-00 (7 years 1 month) 13,919-00 Balance payable as on today Rs. 35,745-00"
We are also of the opinion that interest at the rate of 9% per annum only is awardable in the facts and circumstances of the case from the date of the suit upto date. Accordingly, as per the memo of calculations and as the correctness of the sum due shown therein is not disputed, the defendants are liable to pay a sum of Rs. 35,745/- as on 1st of July 1987 and interest at the rate of 9% per annum from the date of the decree i.e., 1-7-1987 on the principal amount of Rs. 21,826/- till the date of payment.
15. For the reasons stated above, the appeal is allowed. The judgment and decree of the trial court are set aside. There shall be a decree in favour of the plaintiff for a sum of Rs. 35,745/- and interest at the rate of 9% per annum on the principal sum of Rs. 21,826/- from 1-7-1987 till the date of realisation. The defendants are granted two months from today to pay the decretal amount. If the defendants fail to pay the aforesaid amount on or before the expiry of the aforesaid period of two months, the mortgaged property is liable to be sold for realisation of the amount due under the decree.
16. The plaintiff is also entitled to costs throughout proportionate to her success.
17. The appellant was permitted to file the appeal as an indignt person. Therefore, the Court fee payable on the memorandum of appeal shall be the first charge and shall be recovered by the Deputy Commissioner. If not recovered by the Deputy Commissioner.