Madras High Court
R.Thimmaiyyan vs M/S.Smt Chits And Finance Corporation on 16 August, 2017
Author: R.Subramanian
Bench: R.Subramanian
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 16.08.2017 CORAM THE HON'BLE MR. JUSTICE R.SUBRAMANIAN A.S.No.179 of 2013 R.Thimmaiyyan ...Appellant vs. M/s.SMT Chits and Finance Corporation Represented by its Proprietor K.Kalyanasundaram, S/o.Krishnappa Gounder, D.No.72-A, Kamaraj Road, Karamadai, Coimbatore 641 104. ... Respondent Appeal Suit is filed under section 96 of Civil Procedure Code to set aside the judgment and decree of the learned Additional District and Sessions Judge cum Fast Track Court No.II. Coimbatore made in O.S.No.907 of 2004 dated 18.08.2007. For Appellant : Mr.J.Ramakrishnan For Respondent : Mr.A.Muthukumar J U D G M E N T
The defendant in OS.No.907 of 2004 on the file of the Additional District Judge (Fast Track Court II), Coimbatore is the appellant. The suit was filed for a preliminary decree based on a mortgage by deposit of title deeds evidenced by a memorandum of deposit dated 31.05.2001 executed by the defendant.
2. It is the case of the plaintiff that the defendant had borrowed a sum of Rs.15,000/- on 10.06.2000, a sum of Rs.85,000/- on 12.06.2000 and a sum of Rs.4,00,000/- on 31.05.2001 as security for the above said borrowings, the defendant had executed promissory notes on the respective dates. After the borrowing on 31.05.2001 the defendant had deposited the original documents of title namely the sale deed dated 12.06.2000 with the plaintiff at Coimbatore with an intention to create a mortgage by deposit of title deeds. Such deposit is also evidenced by a Memorandum dated 31.05.2001. Since, the defendant had not repaid the loan, the plaintiff was constrained to file the suit for recovery of sum of Rs.6,72,666.66/- with subsequent interest at the rate of 24% p.a.
3. The suit was resisted by the defendant contending that the borrowals are not true. The defendant had denied the entire claim of the plaintiff, as regards the borrowing. He would also contend that he had never visited the Coimbatore Office of the plaintiff. Therefore, there is no question of his depositing the sale deed dated 12.06.2000 with the defendant at its Coimbatore Office on 31.05.2001. Hence, according to him, there was no equitable mortgage created by deposit of title deed.
4. The defendant would further contend that during May 2001, he had approached the plaintiff for loan, for expansion of his cultivation of curry leaves, and at that time, they had imposed various conditions and stated that they would lend him a sum of Rs.2,00,000/-, if the conditions are complied with. When the defendant was hesitant to comply with the said conditions, the Proprietor of the plaintiff and his father-in-law persuaded him to agree with the said conditions and the defendant and his wife were made to agree to those conditions for borrowing a sum of Rs.2,00,000/-.
5. It is also further contended that an agreement of sale was also created on 25.05.2001. Pursuant to the same, using the power of attorney obtained from the defendant, the plaintiff got sale deed registered on 17.10.2002. It is also claimed that when he had taken the loan of a small amount, his signatures were obtained in several blank papers, blank promissory notes and stamp papers, with the help of which the suit documents have been created. It is also claimed that it is the practice of the plaintiff to charge exorbitant interest and criminal proceedings have also been launched at the instance of his wife against the wife of the plaintiff's Proprietor namely Badrammal. On the above contentions, the defendant sought for dismissal of the suit.
6. On the above pleadings, the learned Trial Judge framed the following issues :
1. Whether the defendant is liable to pay any money as per the suit promissory notes?
2. Whether the defendant has discharged the suit claim?
3. To what relief is plaintiff entitled to?
7. On the side of the plaintiff, PW1 was examined and Exs.A1 to A16 were marked. On the side of the defendant, he was examined as DW1 and examined one Duraisamy as DW2 and Exs.B1 to B18 were marked.
8. On the basis of the oral and documentary evidence produced before the Trial Court, the learned Trial Judge concluded that the borrowing as well as deposit of title deeds have been proved and therefore, the plaintiff is entitled to decree as prayed for in the suit. Aggrieved the defendant has come forward with this appeal.
9. Heard Mr.J.Ramakrishnan, learned counsel appearing for the appellant and Mr.A.Muthukumar, learned counsel appearing for the respondent.
10. Mr.J.Ramakrishnan, learned counsel appearing for the appellant would contend that the mortgage by deposit of title deeds has not been established. According to him, the defendant never went to Coimbatore to deposit the title deed. The plaintiff's office is at Karamadai and the letter dated 31.05.2001 evidencing deposit of title deeds was not executed by him at Coimbatore.
11. Mr.J.Ramakrishnan, learned counsel would further contend that the Ex.A5 is the document which creates mortgage by itself and it is not a document evidencing the deposit of title deeds which had been done earlier. Claiming that Ex.A5 would require proper stamping and registration, the learned counsel would contend that the trial Court erred in granting the preliminary decree on a mortgage said to have been created by deposit of title deeds as evidenced by Ex.A5. He would also invite my attention to various documents filed, to show that the defendant had other transactions with the plaintiff. Therefore, according to him, the borrowings on 10.06.2000, 12.06.2000, 31.05.2001 have not been proved by the plaintiff. He would also contend that the receipts produced by him namely Exs.B2, B3, B4, B5 and B6 would show that whatever amount that was borrowed by the defendant from the plaintiff has been discharged.
12. Per contra, Mr.A.Muthukumar, learned counsel appearing for the respondent would contend that the defendant had several transactions with the plaintiff, he has borrowed money by hypothecating his mini-lorry bearing Registration No.TN-38-Z-9171 as early as on 03.04.2000 and the cash vouchers produced by the plaintiff as Exs.A8, A9 and A10 would show that the defendant had actually borrowed money from the plaintiff. He would further contend that Ex.A5 memorandum of deposit of title deeds is only document evidencing such deposit and since it does not record any of the terms of the bargain between the parties relating to the mortgage, the same does not require registration. He would rely upon the judgments of this Court in Ponnuswamy Vs.V.Santhammal and others reported in 1998 (2) MLJ 322 as well as Deb Dutt Seal Vs. Raman Lal Phumra and others reported in AIR 1970 SC 659.
13. Per contra Mr.J.Ramakrishnan, learned counsel appearing for the appellant would rely upon the judgment of Privy Council in Sir Hari Shankar Paul and another Vs. Kedar Nath Saha and others reported in 1939 AIR (PC) 167 and Veeramachineni Gangadhara Rao Vs. The Andhra Bank Ltd., and others reported in AIR 1971 SC 1613. The learned counsel would also rely upon Section 64 of the Chit Fund Act, and contended that the suit is not maintainable.
14. From the above arguments, the following points are framed for determination:
1. Whether the defendant had discharged the burden of proving that the promissory notes dated 10.06.2000, 12.06.2000 and 31.05.2001 are not supported by consideration?
2. Whether the Ex.A5 requires registration and stamp duty?
3. Whether the Trial Court was justified in granting future interest of 24% p.a.?
Point No.1 :
15. The defendant would admit his signature in the documents namely Exs.A1 to A3 and A5. His claim is that those documents were obtained by the plaintiff in blank and they have been filled up subsequently. The answer to this plea is not far to seek. The promissory notes Exs.A1 to A3 are supported by cash vouchers which were marked as Exs.A8, A9 and A10, which contain the signature of the defendant. The defendant has not denied those signatures. Those cash vouchers bear the respective dates of the promissory notes also.
16. Apart from the above, the plaintiff has also produced the statement of accounts Exs.A6 and A7, which would go to show that the defendant has borrowed money from the plaintiff on the respective dates and whatever payment that has been made has been given credit to. The claim of the defendant that the monies were paid in full discharge of the promissory note is not true.
17. Even assuming that the defendant had signed in blank promissory notes, Section 20 of the Negotiable Instruments Act enables the plaintiff to fill it up and sue upon the same. The presumption available under Section 118 of the Negotiable Instruments Act is also available to promissory note, which could be filled up under Section 20 of Negotiable Instruments Act. So, it is for the defendant to prove the failure of consideration. Except the interested testimony of the defendant there is no other evidence to show the failure of consideration. On the other hand, Exs.A8, A9 and A10 belie the stand of defendant that he has not borrowed money.
18. Ex.A12 the copy of the RC book of the mini-lorry owned by the defendant would show that the defendant borrowed money from the plaintiff by hypothecating the same even before the suit transactions ie., in April 2000. Therefore, the Trial Court was right in concluding that the plaintiff has proved that it had advanced money to the defendant and defendant had failed to discharge the burden of proving that the promissory notes are not supported by consideration and I do not see any reason to interfere with the findings of the trial Court on the question of execution of promissory notes and the borrowing.
Point No. 2:
19. Mr.J.Ramakrishnan, learned counsel appearing for the appellant would vehemently contend that Ex.A5, being a document creating a mortgage in itself would require registration. Ex.A5 reads as follows:
nfhit khtl;lk;. Fhukilapy ,a';fp tUk; SMT Chit & Finance Corporation epWtdj;jpd; chpikahsh; jpU/nf/fy;ahz Re;juk; Mfpa c';fSf;F. Ehd; fle;j 10/06/2000k; njjpapy; bgw;w U:/15.000-?f;Fk;. 12/06/2000 njjpapy; bgw;w U:/85.000-? f;Fk; kPz;Lk; 31/05/2001 njjpapy fldhf bgw;w U:/4.00.000-? f;Fk; Mf bkhj;jk; U:/5.00.000-?f;Fk; Mjuthf ,Uf;Fk; bghUl;L vd; bgahpy; 12/06/2000k; njjpapy; nkl;Lg;ghisak; rhh;gjpthsh; mYtyfj;jpy; gjpthd fpiua gj;jpu vz;/3331-2000 vd;w mry; fiuag; gj;jpuj;jpid nkw;go flDf;F Mjuthf gj;jpu itg;gPL bra;jpf;fpnwd;/ 31/05/2001y; ,e;j fojj;jpd; K:yk; itg;gPL bra;jpUf;Fk; fpiua brhj;jpd; kjpg;g[ ehd; bgw;w flidtpl kjpg;gpy; Fiwthf ,Ug;gjhy; ehd; j';fsplk; fldhf bgw;w gzj;ijf; bfhz;L ,d;iwa njjpapy; nkl;Lg;ghisak; rhh;gjpthsh; mYtyfj;jpy; vd; bgahpy fpuak; bgw;wpUf;Fk; Ie;J yl;rk; khh;f;bfl; kjpg;g[ cs;s brhj;jpd; mry; gj;jpuj;ij ,d;wpypUe;J 15 ehl;fSf;Fs; flDf;F nkYk; Mjuthf itg;gPL bra;J bfhLg;gJld; nkw;go fld;fSf;F khjhkhjk; brYj;j ntz;oa tl;oiar; brYj;jp te;J xU tUl bfLtpw;Fs; mriya[k; brYj;jp gj;jpu';fis thg!; bgw;Wf; bfhs;ntdhft[k;/
20. According to the learned counsel, the recitals in Ex.A5 would show that it creates mortgage by itself inasmuch as it reflects the entire bargain between the parties and that the borrowing, deposit of title deeds and the execution of the memorandum of deposit of title deeds are simultaneous.
21. In answer to this contention of the learned counsel for the appellant, Mr.A.Muthukumar, learned counsel appearing for the respondent would invite my attention to the judgment of this Court in Ponnuswamy Vs.V.Santhammal and others reported in 1998 (2) MLJ 322, wherein this Honble Court after review of the entire case law in the subject, concluded that in order to prove that the documents of deposit of title deeds would require registration, it must contain all the essentials of the transaction and the essentials are :
1) date,
2) date of repayment,
3) sum secured,
4) nature of mortgage and
5) subject matter of mortgage.
22. After referring to the observations of the Privy Council in Sir Hari Shankar Paul and another Vs. Kedar Nath Saha and others reported in 1939 AIR (PC) 167 this Court went on to hold that when the document does not contain any one of the essentials it would not amount to an independent document creating a mortgage. A reading of the document Ex.A5 would clearly show that it does not incorporate all the essentials of the transaction.
23. What is registerable under the Registration Act is the document and not the transaction. Unless it is shown that the document incorporates all the essentials of the mortgage, it cannot be deemed to be a mortgage by itself, so as to require registration. From Ex.A5, it could be seen that the rate of interest is not mentioned, time for repayment is not mentioned. Therefore, I do not think Ex.A5 can be said to be document of mortgage by itself. It can at best be said to be a letter evidencing mortgage already created. To the same effect is the judgment of Supreme Court in Veeramachineni Gangadhara Rao Vs. The Andhra Bank Ltd., and others reported in AIR 1971 SC 1613, wherein the Honble Supreme Court quoted the observations in Rachpal Maharaj Vs. Bhagwandas reported in AIR 1950 SC 272 which run as follows:
that when a debtor deposits with the creditor title deeds of his property with intent to create a security, the law implies a contract between the parties to create a mortgage and no registered instrument is required under Section 59 as in other forms of mortgage. But if the parties choose to reduce the contract to writing, the implication is excluded by their express bargain, and the document will be the sole evidence of its terms. In such a case the deposit and the document both form integral parts of the transaction and are essential ingredients in the creation of the mortgage. As the deposit alone is not intended to create the charge and the document, which constitutes the bargain regarding the security, is also necessary and operates to create the charge in conjunction with the deposit, it requires registration under Section 17 of the Indian Registration Act, 1908, as a non-testamentary instrument, creating an interest in immovable property, where the value of such property is one hundred rupees and upwards Therefore the crucial question is : Did the parties intend to reduce their bargain regarding the deposit of the title deeds to the form of a document? If so, the document requires registration. If on the other hand, its proper construction and the surrounding circumstances lead to the conclusion that the parties did not intend to do so, then, there being no express bargain, the contract to create the mortgage arises by implication of the law from the deposit itself with the requisite intention, and the document being merely evidential does not require registration.
24. In the light of the categorical pronouncements of this Court as well as the Honble Supreme Court, I do not think that the defendant can contend that the Ex.A5 is a document, which operates to create a mortgage, at the best, it could be said that it is a document, which evidences deposit of title deed with an intention to create mortgage, which does not require registration under Section 17 of the Registration Act.
25. Apart from all the above technical submissions, the defendant is unable to explain the possession of the original title deed dated 10.06.2000 in the hands of the plaintiff. Thus, the above circumstance in my considered opinion, makes the case of the defendant unbelievable.
26. The Trial Court has refused to believe the plea of the defendant to the effect that blank promissory notes obtained from him which had been filled up and sued upon for lack of evidence. Therefore, I do not see any reason to interfere with the said factual finding of the Trial Court.
27. Once Ex.A5 is found to be a document, which does not require registration and it has been found that the defendant had deposited the title deed with the plaintiff at Coimbatore which admittedly is a notified town under Section 58(f) of the Transfer of Property Act, the case of the defendant that there was no mortgage cannot be accepted. In view of the above reasoning, the second point is also answered in favour of the respondent and against the appellant.
Point No.3:
28. The Trial Court has granted future interest of 24% p.a., which in my considered opinion, is really excessive. The suit is on mortgage and it is not shown that it is a commercial transaction. Therefore, under Section 34 of the Code of Civil Procedure, the Court can grant interest only at 6% p.a. on such principal sum from the date of decree to the date of payment or to such earlier date as the Court thinks fit. The plaintiff has added interest at 24% p.a. on the amount due under the promissory note till date of filing of the suit. Therefore, the plaintiff is not entitled to interest at 24% p.a either during the pendency of the suit or after the decree. Hence, I am of the considered opinion that the decree of the Trial Court on the question of interest needs modification.
29. For the above reason, the appeal is partly allowed and the judgment and decree of the trial Court will stand modified as follows :
The defendant is directed to pay a sum of Rs.6,72,666/- to the plaintiff along with the interest at 9% p.a. from 28.10.2004 (date of suit) till 18.08.2007 (date of decree) and thereafter at 6% till date of realization on the principal amount of Rs.5,00,000/- along with proportionate cost. In other aspects the judgment and decree of the Trial Court are confirmed. However, considering the facts and circumstances of the case there will be no order as to costs in this appeal.
16.08.2017 dsa Index : Yes/No Speaking order/Non-speaking order R.SUBRAMANIAN,J.
dsa To The learned Additional District and Sessions Judge cum Fast Track Court No.2, Coimbatore.
A.S.No.179 of 201316.08.2017