Madhya Pradesh High Court
Bharosilal And Ors. vs Mst. Shiladevi on 2 February, 1988
Equivalent citations: AIR1989MP122, AIR 1989 MADHYA PRADESH 122, (1988) JAB LJ 712
JUDGMENT T.N. Singh, J.
1. This is plaintiffs' appeal whose suit for redemption of mortgage of their house has been decreed by the trial Court. In this appeal they have assailed the direction of the trial Court requiring the plaintiffs to pay to the defendant the sum of Rs. 10,000/- being the sum advanced by the defendant as loan which was secured by the mortgage.
2. The short question that arises for decision in this appeal is whether the preliminary decree which is impugned is legal and valid inasmuch as it is not drawn up in accordance with Rule 7 of Order 34 of the Civil P.C. In other words whether there should have been a direction first for an account being taken of what was due to the defendant at the date of the decree for principal and interest on the mortgage and thereafter a declaration ought to have been made of the amount, if any, to be paid to the defendant. Indeed, it is contended in this appeal that the mortgagors/plaintiffs have paid a total amount of Rs. 28,000/- towards principal amount and interest due under the mortgage and as such, they were entitled to refund of the amount illegally realised from them by the defendant/ mortgagee and that there could be no direction against them for payment of any amount to the defendant.
3. In this connection, it would be appropriate to note that in the suit, as many as eight issues were struck and tried, but the controversy which has to be resolved in this appeal is covered by issue No. 7 and three sub-clauses of issue No. 4. In respect of the three different propositions of facts and law covered by issue No. 4, the conclusion recorded by the trial Court may be summarized as follows:
(a) The defendant had recovered a sum of Rs. 20,400/- from the plaintiffs by way of rent for the mortgaged house, as alleged in the plaint,
(b) The plaintiffs were not entitled to claim adjustment of the said payment against principal and interest on the loan advanced; and
(e) The plaintiffs had not made an excess payment of Rs. 1,925/- against loan advanced.
The conclusion of the trial Court as respects the matter covered by issue No. 7 is that the decision rendered in Suit No. 35-A of 1971 between the panics concerning tenancy right operated res judicata.
4. At this stage, some admitted facts having a bearing on the question to be decided in this appeal may be stated. Two documents were contemporaneously executed on 13-11-1967, namely, a mortgage-deed and a rent-note, proved in the suit as Ess. D/l and D/2 respectively. Although under rent note it was contemplated that the plaintiffs would occupy the mortgaged-house as tenants on payment of monthly rent of Rs. 200/- per month under the mortgage-deed, the first and foremost condition of the mortgaged deed was as follows:
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5. Before suit was instituted, the plaintiffs served a notice (Ex. P/2) on the defendant alleging that they had paid from time to time an amount totalling to Rs. 20,400/- and their liability under the mortgage transaction having been liquidated in full, they were entitled to receive back the title-deeds of the mortgaged-house and to get the discharge of the mortgage recorded by the defendant. The defendant sent a reply (Ex. P/3) through her lawyer in which it was admitted that a sum of Rs. 20,200/- had been received from the plaintiffs, but she claimed that the mortgage could not be deemed discharged inasmuch as a total sum of Rs. 34,807.25 was the liability of the plaintiffs which had to be discharged. In this letter, it was mentioned that among others, the plaintiffs had to pay to the defendant Rs. 10,000/- as the mortgage loan and Rs. 23,400/- against rent and mesne profit.
6. The short question which is mainly agitated in this appeal is, whether the claims of the defendant for payment of interest at the rate of Rs. 200/- per month could be legally allowed inasmuch as the rate of interest being reckoned at 24 per cent per annum, would be illegal and not enforceable. However, it is necessary first to dispose of the contention forcefully pressed by Shri K. N. Gupta, appearing for the defendant/ respondent who supports the finding and conclusion of the trial Court on issue No. 7. It is contended by Shri K. N. Gupta that the defendant had got an ejectment decree against the plaintiffs in suit No. 35-A of 1971 and in that suit, it was decided that the plaintiffs were liable to be evicted for non-payment of arrears of rent. Therefore, the question as to whether the liability of Rs. 200/- in terms of the rent-note and the mortgage-deed was legal or not cannot be re-opened now.
7. On behalf of the appellants, Shri H. D. Gupta, has contended that in the earlier suit, no issue was raised on the legality of the amount claimed as rent payable by the present plaintiffs (defendants in that suit) because the suit was based on rent-note only and there was no occasion for the Court to determine the question as to whether the amount claimed was not rent, but interest due under the mortgage-deed. Counsel has further submitted that the quetion of interest payable on a mortgage loan can only be determined in accordance with the provisions of Rule 7 of Order 34, C.P.C. by a court of competent jurisdiction, namely, the District Judge having jurisdiction over the subject-matter of the mortgage. The earlier suit for eviction of the plaintiffs was filed in, and decreed by learned Second Civil Judge, Class II, Gwalior and that Court had no jurisdiction to deal with the question of interest which was germane to the claim for redemption of mortgage only. It is forcefully submitted by Shri H. D. Gupta that the trial Court went wrong in construing condition No. 1, aforequoted, of the mortgage-deed inasmuch as there being no express stipulation of rate of interest payable on the mortgage loan, it was incumbent on the trial Court to consider whether Rs. 200/- per month, claimed as rent under the contemporaneous rent-note should be considered as interest referred in condition No. 1 and to determine whether such interest was excessive and was legally recoverable.
8. Indeed, Shri H. D. Gupta has also drawn my attention to the fact that when the present defendant/respondent levied execution of the ejectment decree obtained by her against the plaintiffs, ejectment was stayed by the trial Court on the condition of the appellants' continuing to deposit Rs. 200/-per month and the appellants did so up to August, 1979 in accordance with the order of the Executing Court. However, that condition was challenged by the appellants in this Court in Misc. Appeal No. 36 of 1978 and this Court deleted the impugned condition observing as follows :
"But in the facts and circumstances of the present case and this being undisputed that the transaction was of mortgage for securing repayment of the amount of loan and double the amount of original loan has already been obtained by the decree-holder".
9. In support of his contention, Shri K. N. Gupta has relied on Explanation VIII to Section 11, C.P.C. which I quote :
"An issue heard and finally decided by a Court of limited jurisdiction, competent to decide such issue, shall operate as res judicata in a subsequent suit, notwithstanding that such Court of limited jurisdiction was not competent to try such subsequent suit or the suit in which such issue has been subsequently raised."
However I do not think if the Explanation afore-quoted can be read in isolation, torn out of context and reference is necessary, in my opinion, to the parent provision of Section 11 which bespeaks "No court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the parties ......in a court competent to try such subsequent suit....." In my opinion, the Explanation does not indent in any manner and to any extent the requirement envisaged in the first part of Section 11. Whether or not an issue was heard and finally decided by Court of limited jurisdiction it would still be open to question if what was decided by such Court was or not, a matter which had been "directly and substantially in issue" in the former suit instituted in such Court. In the instant case, it is difficult to accept the proposition that the legality of interest payable on the mortgage loan could be or had been "directly and substantially in issue" in the ejectment suit which the present defendant/respondent had instituted against the appellants. In the earlier suit, the claim for ejectment was based on the rent-note and for the purpose of decreeing ejectment the only "matter" which could be said to be "directly and substantially in issue" between the parties in that suit was nonpayment of rent payable at the rate of Rs. 200/- per month under the rent-note. Indeed, the very fact that the amount of Rs. 200/- was considered as "rent" and the suit was decreed on that basis excluded the possibility of determination of legality or validity of the liability as "interest". The question of payment of "interest" did not come up for decision in the earlier suit and the Court was precluded, therefore, from determining the question of legality of validity of the claim of interest. Merely because in the earlier suit it was held that the present defendant respondent was entitled to legally claim payment of rent of Rs. 200/-from the present appellants/plaintiffs and for non-payment of the said rent, the suit was decreed, it cannot be said that the legality or validity of the claim of Rs. 200/- as interest was in issue or that the question was decided.
10. On reference to Ex.D/29, the decision rendered in the earlier suit. I find that as many as six issues were struck of which the material issue No. 1 raised the question as to whether the defendant had taken on rent to suit house on the condition of payment of monthly rent of Rs. 200/- on and from 13-11-1987. This issue was decided in favour of the plaintiffs and issue No. 5 was also decided in favour of the plaintiffs about which also few words may be said. Under issue No. 5 the question raised was, whether the plaintiffs' suit (under Madhya Pradesh Accommodation Control Act, 1961) was maintainable because the rent-note was executed to ensure payment of interest. True, the decision thereof was that the suit was maintainable, but no question of legality or validity of the interest was raised under the issue and none was decided. The matter which was "directly and substantially" raised in the issue was that of maintainability of the suit and nothing more than that. In this connection, reference may be made to the decision in the case of Ram Nandan, AIR 1951 SC 155 wherein the plea of constructive res judicata was negatived. It was held that the question that appellants were entitled to take advantage of the provisions of Section 7 of the Bihar Money-lenders' Act was entirety different from that the interpretation sought to be put by them on Section 7 was the right one because it was contended that in the earlier suit, the plea based on Section 11 (old) was raised and the two provisions were in pari materia. In the earlier suit, it was merely held that the appellants were entitled to claim benefit of the said provision without going at all into the question of interpretation of relevant provision. I have no doubt that the decision supports the view taken by me that of the earlier decision, scope of the issue, nature of the "matter" and the ambit of the decision rendered are crucial to the plea of res judicata. Any "matter" which may be incidentally arid not "substantially" in issue cannot be said to be decisive of the controversy subsequently raised despite there being some sort of identity between the controversies raised at two different stages. It is necessary to stress importance of the crucial requirement of the plea of res judicata, namely, that at both stages the "matter" must be directly and "substantially" in issue. In Isher Singh's case AIR 1965 SC 948, it was held that the question whether a matter was directly and substantially" in issue in the former, has to be decided on the pleadings in the former suit, the issues struck as also the decision rendered thereon in that suit.
11. Reliance is placed by Shri H. D. Gupta on the decision in Richpal Singh, AIR 1987 SC 2205 to support his contention that plea of res judicata was not available to the defendant/respondent in this case. Indeed, it was held in that case by their Lordships that an order directing eviction of a person by Revenue Court under special law does not operate res judicata in a civil suit for restoration of possession by that person claiming to be a mortgagee and not a tenant of the alleged landlord Although, in terms, thereto no reference in their Lordships', judgment to Explanation VIII, I would think that the decision lays down the principle that a distinction must be made between a court of "limited" jurisdiction and "no" jurisdiction.
In that case, it was held that the dispute as to the nature of relationship of landlord and tenant between the parties was outside the jurisdiction of Revenue court under the relevant enactment and, therefore, the earlier decision of the Revenue court could not operate as res judicata in the subsequent civil suit between parties. Shri K. N. Gupta, on the other hand, has relied on Ishwardas, AIR 1979 SC 551, but I have no doubt that the decision does not support him. It was held that the plea of res judicata may be sustained "if the questions at issue and the parties are the same, subject of course to the other conditions prescribed by Section 11 C.P.C." This decision does not lay down anything more than that "the questions at issue" are to be the same and accordingly, the decision does not absolve the subsequent court of the duly to determine if the question raised in and decided by the earlier court was the same as raised before it. Indeed, it does not lay down that it would not be necessary to examine whether the matter raised in the subsequent suit was "directly and substantially in issue"
in the former suit.
12. The question that survives for decision is indeed the main question which may now be examined, as to what interest the defendant/respondent is entitled to claim on the loan advanced and secured by the mortgage in the instant case. It is not disputed that the Usurious loans Act, 1918 could be applicable to the transaction in the instant case and, therefore, it is submitted that in view of the provisions of Section 3 of the said Act it was incumbent on the trial Court to re-open the transaction when interest claimed was excessive and that the parties cannot be held bound by the contract relating to the transaction. Indeed, Section 3 authorises the court to take an account between the parties and relieve the debtor of all liability in respect of any excessive interest. My attention is drawn to the State amendment of Section 3, particularly to the second Proviso to Sub-section 2(a) thereof It is contemplated thereunder that interest exceeding 12 per cent per annum in case of the secured loan would be per se excessive. Case-law is also cited by Shri H. D. Gupta to which I now advert.
13. A D.B. decision of Allahabad High Court in Samar Ali v. Karim-ul-Lah, (1886) ILR 8 All 402 has held that the mortgage would be deemed redeemed as soon as principal mortgage money with 12 per cent interest had been realised by the mortgagee from the produce of the property In C. Khisty v. K. B. Subbarao, AIR 1941 Nag 294, it was held that as regards jurisdiction of the courts, the Usurious Loans Act makes no distinction between types of courts to which it is to apply. It applies to all suits which fulfil the conditions set out in Section 2(3)(b) irrespective of the kind of court in which they are instituted.
Further, it was held, Section 3 is mandatory and the court is bound to exercise powers thereunder the moment the facts which bring the claim within the ambit of the Act are brought to its notice. In S.R. Naidu v. Bank of Karaikudi, AIR 1971 SC 884 having resorted to the provisions of Section 3 of the Usurious Loans Act, 1918, their Lordships held that 12 per cent interest was unfair and penal and allowed interest at the rate of 10 1/2 per cent from the date of the mortgage to the date of the preliminary decree and thereafter at the rate of 6 per cent per annum till realisation. This Court in Uttam Singh v. Sardarsingh, 1980 Jab LJ 576 invoked Section 3 of the Usurious Loans Act and in accordance with the provisions of above-referred second proviso of the State amendment, allowed 18 per cent interest on an unsecured loan.
14. Although Shri K. N. Gupta has relied on Mathura Lal's case AIR 1971 SC 310, the decision does not help him. On the other hand, it lays down that under Order 34 Rule 4, C.P.C., the mortgagee cannot deprive the mortgagor of his right to redeem so long as the property is not sold and a final decree for sate under Order 34 is not prepared Reliance placed by him on Devi Das v. Yeotmal Central Bank. AIR 1956 Nag 239 is also misconceived. It only lays down that in a redemption suit the court may provide for payment of interest from the date fixed for redemption. Although counsel has pressed in service Trustees of Motidas v. Ramjatan Ramprasad, 1964 MPLJ 674 : (AIR 1963 Madh Pra265), the decision would not benefit the defendant/respondent. It is too late and hopelessly incompetent for her to contend that redemption on the basis of mortgage-deed on which the claim was founded was not permissible. True, this Court held that when there was an anomalous mortgage, the mortgagor could be sued and evicted on the strength of the rent-note executed by him, but as held by their Lordships in Mathura Lal (supra) mortgagor's suit for redemption would not be barred on that account.
15. For all the foregoing reasons, I have no hesitation to conclude as follows : --
(i) The decision in suit No. 35-A of 1971 rendered by the Second Civil Judge Class II, Gwalior does not operate res judicata between the parties and the question of legality of interest is open for consideration and decision in this appeal.
(ii) In view of the provisions of Section 3 of the Usurious Loans Act, 1918 read with second proviso of the State amendment, the defendant/respondent shall be entitled to payment of interest at the rate of 12 per cent. per annum from the date of the mortgage loan to the date of the preliminary decree and thereafter 6 per cent per annum on any amount that may be due payable by the plaintiffs/appellants till that amount is realised. Accordingly, the preliminary decree impugned in this case stands modified by the direction that an account shall be taken of all payments made by the plaintiffs/appellants and on calculation of interest payable by them on the mortgage loan in the manner aforesaid, due credit therefor shall be given to them. A decree shall thereafter be passed For payment by the party as liable to pay the same on account being taken in the aforesaid manner and indeed, if the defendant/ respondent is held liable, then the decree may be passed against her for refund of the excess amount said to have been recovered illegally by her from the plaintiffs/ appellants.
16. In the result, the appeal succeeds to the extent indicated. The impugned decree stands modified only to the extent hereinbefore mentioned. The Court below is directed to take accounts in terms of Rule 7 of Order 34, C.P.C., allowing 12 per cent interest on the mortgage loan as hereinbefore directed. In accordance with the accounts so taken, the fresh preliminary decree shall be prepared.
In the facts and circumstances of the case, I make no order as to costs.