Andhra HC (Pre-Telangana)
M/S. Vijaya Agencies, Rep. By Its ... vs India Cements Limited And Others on 7 August, 2013
Bench: L. Narasimha Reddy, S.V. Bhatt
HONOURABLE SRI JUSTICE L. NARASIMHA REDDY AND HONOURABLE SRI JUSTICE S.V. BHATT APPEAL SUIT No.2100 OF 2001 and batch Date:07-08-2013 M/s. Vijaya Agencies, Rep. by its Proprietor Venigendla Vijaya Babu, Nidubrolu, Guntur District .. Appellant India Cements Limited and others .. Respondents Counsel for the appellant :Sri O. Manohar Reddy Counsel for respondent No.1 : Sri Chithur Srinivas Counsel for respondent No.2 & 3 : Sri V. Ravinder Rao <GIST: >HEAD NOTE: ?CASES REFERRED: CROSS APPEAL (S.R.) No.77999 OF 2001 IN A.S. No.2100 OF 2001 CROSS APPEAL (S.R.) No.77999 OF 2001 IN A.S. No.2100 OF 2001 COMMON JUDGMENT:
(Per Hon'ble Sri Justice L. Narasimha Reddy) Defendants 1 and 2 in O.S. No.22 of 1995 on the file of the Senior Civil Judge, Bapatla, filed these appeals against the preliminary decree and final decree passed therein.
2. For the sake of convenience, the parties are referred to as arrayed in the suit.
3. The plaintiff is a manufacturer of cement. The 1st defendant, M/s. Vijaya Agencies, is a proprietary concern of one Venigandla Vijayababu. It is one of the dealers of the plaintiff at Bapatla. Over the period, different quantities of cement were supplied by the plaintiff to the 1st defendant.
4. The plaintiff filed the suit alleging that its dealer, the 1st defendant, owed a sum of Rs.6.00 lakhs by 1993 and when he was unable to pay the debt, the 2nd defendant has deposited the title deed in respect of an item of immovable property and a simple mortgage was created. Stating that the defendants did not repay the amount due in spite of repeated demands, the plaintiff prayed for a preliminary decree for foreclosure of the mortgage.
5. The 1st defendant filed a written statement admitting that he owed substantial amount to the plaintiff towards cost of the cement supplied to him. It was also his case that when he was unable to pay the amount, and on being insisted, he deposited the title deed in relation to the property owned by his father, the 2nd defendant. His plea was that there was no valid mortgage in the eye of law and the suit for mortgage is not maintainable.
6. In his written statement, the 2nd defendant stated that he did not deposit the title deed in respect of his property and without his knowledge, his son, the 1st defendant, has taken them and appears to have deposited them with the plaintiff. According to him, even if the 1st defendant has deposited the sale deed, neither any mortgage can be said to have been created nor does it bind him.
7. The trial Court framed the following issues for its consideration:
"1. Whether the equitable mortgage dt.20-12-1993 is true, valid and binding on D-2
2. Whether the ledger extract is correct "
8. To prove its case, plaintiff examined its law officer as PW.1 and filed Exs.A-1 to A-21. The defendants deposed as DWs.1 and 2 and filed Exs.B-1 to B-4.
9. The trial Court passed a preliminary decree, as prayed for, through the judgment dated 19-04-2001.
10. While the 1st defendant filed A.S. No.2100 of 2001, the 2nd defendant filed the cross-appeal.
11. The trial Court passed a final decree through its order dated 06-11-2001 in I.A. No.971 of 2000. The 2nd defendant filed A.S. No.3417 of 2003 against the final decree.
12. Sri O. Manoher Reddy, learned counsel for the 1st defendant, submits that the suit for foreclosure of mortgage is not maintainable at all since the property covered by the title deed, deposited by the 1st defendant, does not belong to him. He contends that the so-called mortgage was not in relation to any specific amount and a running account between the stockist and the dealer cannot be subject matter of a mortgage. He further submits that if a mortgage was created in respect of any future debt, it is essential that a document incorporating the relevant clause is executed; and such a document is not present in the instant case.
13. Sri V. Ravinder Rao, learned counsel for the 2nd defendant, submits that the plea of the plaintiff that the 2nd defendant deposited the title deed is incorrect and that no acceptable evidence was adduced to substantiate this. He contends that the document pertaining to the property of the 2nd defendant was clandestinely taken by the 1st defendant and even the latter has admitted it, and still the trial Court proceeded on the assumption that the mortgage was created by the 2nd defendant in favour of the plaintiff. He further submits that if, in fact, there was deposit of title deed with the intention of creation of mortgage, at least some acknowledgement in this behalf could have been obtained by an establishment like the plaintiff.
14. Sri Chithur Srinivas, learned counsel for the plaintiff, submits that the oral and documentary evidence placed before the trial Court has clearly established that the defendants have deposited the title deed marked as Ex.A-13 with a clear intention of creating mortgage and that the same is evident from the other correspondence.
He submits that though the 2nd defendant wanted to come to the rescue of his son
- the 1st defendant, who was heavily indebted to the plaintiff, he changed his stance at a later point of time. He submits that the trial Court has examined the matter from the correct perspective and the decree passed by it does not warrant any interference.
15. In view of the rival submissions made by the learned counsel for the parties, the points that arise for consideration before this Court are:
1) Whether the plaintiff proved existence of a valid simple mortgage in its favour
2) Whether the finding recorded by the trial Court as to the existence of mortgage can be supported in law
3) Whether the plaintiff is entitled to recover the amount from the 1st defendant
16. As observed earlier, the plaintiff filed the suit for foreclosure of mortgage, a simple mortgage through deposit of title deed. The suit was contested by both the defendants by filing separate written statements. A preliminary decree was passed, that was followed by a final decree.
POINT No.1:
17. It has already been mentioned that the 1st defendant, who is a proprietary concern, is a dealer of the plaintiff. There is no denial of the fact that the stocks of different quantity were supplied to the 1st defendant and substantial amount in the form of cost of the cement remained unpaid. According to the plaintiff, when the 1st defendant was unable to pay the amount of about Rs.6.00 lakhs, his father, the 2nd defendant, came forward and deposited the title deed marked as Ex.A-13, as a measure of security and creation of simple mortgage.
18. The law provides for creation of simple mortgage by mere deposit of title deeds. It is not necessary that any document must be executed much less it needs to be registered. However, mere possession of title deed, in respect of an item of immovable property, by a person other than the owner, by itself does not bring about a transaction of mortgage. In the ordinary course, whenever a title deed is deposited with another person, the one who makes it must express his intention to create a mortgage vis--vis the property. The burden to prove the relevant facts squarely rests upon the mortgagee. In the absence of any written document, which can spell out the purpose of deposit of the mortgage, the mortgagee must, at least, adduce the evidence to the satisfaction of the Court to prove the facts pleaded by him.
19. In the instant case, though PW.1 alone is the witness examined on behalf of the plaintiff, he is not the person, who has received the document, either from the 1st defendant or the 2nd defendant. Therefore, he cannot be said to be the person fully acquainted with the transaction. Added to that, he did not refer to any other circumstances or evidence to show that the deposit of title deed was with an intention to create mortgage. Here itself, it needs to be mentioned that the plaintiff is a gigantic commercial and industrial organization and even the minute transaction or correspondence, particularly with the strangers, involving financial implications would be through a written document or letter. Such correspondence, however, is thoroughly missing in the instant case.
20. Whatever may be the mutual understanding of the parties to create a simple mortgage and howsoever inclined the Court may be, to infer the existence of the transactions in matters of that nature, when the debtor is the owner of the mortgaged property, a different approach becomes necessary; when the document in relation to a property owned by a person, who is a stranger to the money transaction, when lands into the hands of the person to whom the money is due by a person, who is not the owner of the property, the burden is relatively heavier upon the person, who claims existence of mortgage; in his favour. To enable the Court to presume existence of a mortgage in his favour, the mortgagee must establish as to how, and under what circumstances, the person, who is not his debtor happened to deliver the documents.
Here again, the evidence is lacking on the part of the plaintiff. As a matter of fact, the version is somewhat equivocal. In the plaint, it was mentioned that Ex.A-13 was delivered by the 2nd defendant, DW.2. However, in the cross- examination, PW.1 stated that the document was delivered jointly by DWs.1 and 2. This clear contradiction has its own impact upon the nature of the claim of the plaintiff as regards the existence of mortgage.
21. We, therefore, hold that the plaintiff failed to prove the existence of a simple mortgage in its favour, vis--vis the 2nd defendant.
POINT No.2:
22. To a larger extent, the second point is already dealt with in the discussion pertaining to the first point. The trial Court did not take into account, the fact that PW.1 is the only witness examined on behalf of the plaintiff and he was not the person, who received the document when presented. No one, who has received the document with the intention of creating a simple mortgage, was examined. The trial Court seriously erred when it has inadvertently or otherwise has placed the burden upon DW.2, the 2nd defendant, to prove that he has not created any equitable mortgage.
23. We, therefore, hold that the finding recorded by the trial Court as to existence of mortgage cannot be sustained in law.
POINT No.3:
24. We have already taken a view that the mortgage pleaded by the plaintiff is not proved. That, however, does not relieve the 1st defendant of his obligation to pay the amount. Ex.A-11 is a letter of confirmation sent by DW.1, the 1st defendant. In addition to that, he addressed a letter dated 02-03-1994 marked as Ex.A-12, wherein he has acknowledged the debt but expressed his inability to pay the same immediately. The evidence on record clearly establishes that the 1st defendant has acknowledged his debt to the plaintiff.
25. Therefore, we hold that the plaintiff is entitled to recover the suit amount from the 1st defendant. There shall be a decree, accordingly.
26. We, therefore, allow A.S. No.2100 of 2001 in part and the cross- appeal (S.R.) No.779999 of 2001 filed therein, and set aside the preliminary decree dated 19-04-2001 passed by the trial Court. In its place, we direct that a decree for recovery of suit amount shall stand passed against the 1st defendant.
27. A.S. No.3417 of 2003 filed against the final decree is allowed and the final decree dated 06-11-2011 in I.A. No.971 of 2001 is set aside.
28. The Miscellaneous Applications filed in these appeals shall stand disposed of. In both the appeals as well as the cross-appeal (S.R.), there shall be no order as to costs.
________________________ L. NARASIMHA REDDY, J ______________________ S.V. BHATT, J August 7, 2013.