Karnataka High Court
Chitalia Bros. vs The South Indian Bank, Trichur And Ors. on 25 February, 1987
Equivalent citations: AIR1988KANT59, ILR1987KAR1242, AIR 1988 KARNATAKA 59, ILR 1987 KANT 1242
JUDGMENT Bopanna, J.
1. This appeal by the 5th defendant is preferred against the judgment and decree made by the Principal Civil Judge, Bangalore District, Bangalore, in O.S. No. 95 of 1971- decreeing the suit of the plaintiff against defendants 1 and 5 for a sum of Rs. 32,629-25 p. with costs and current interest at 6% per annum to be recovered by the sale of the plaint schedule properties and, in the event of any deficiency in the sale proceeds a decree for the balance amount to be recovered from the 1st defendant personally. The 1st defendant had remained ex parte before the trial Court and in this Court also and, therefore, the validity or otherwise of the second part of the decree against the 1st defendant personally does not arise for consideration in this appeal. We are only concerned with the mortgage decree made against the 5th defendant.
2. The facts in this case are not in dispute. But, certain legal issues arise for consideration which, in our view, require to be considered, since there is an earlier decision of a learned Judge of this Court (Kulkarni, J-) taking, the view that the doctrine of lis pendens as propounded under S. 52 of the T. P. Act (in short the Act) is not applicable to Court auction/sale see ILR (1986) 2 Kant 3776, Syndicate Bank v. Pundalika Nayak. Before we go into the facts of the case, we may mention that we had heard the learned counsel for the appellant on the ratio enunciated by this Court in Syndicate Bank and he conceded that that decision does not appear to be correct and, therefore, he preferred to challenge the decree of the trial Court on other gounds which were not taken. before the trial Court. Though we were reluctant to permit him to argue on other questions excepting the point arising under 0. XXI, R. 58 of C.P * C. since they were questions of law, we have heard him on the other points also and this judgment will cover all the points argued by him in this appeal.
3. The facts stated briefly areas follows :
The 1st defendant is the proprietor of money lending concern in Bangalore. He had some time in September 1967 obtained a loan of Rs. 50,000/- from the plaintiff/Bank. on the security of the property bearing Nos. 263 and 264 situate in Raja Market, Avenue Road, Bangalore (hereinafter called the mortgaged properties). This. security was created by mortgaging the properties by deposit of title deeds in favour of the plaintiff/Bank. The contents of the letter creating the mortgage by deposit of title deeds marked as Ex.P. I before the trial Court may be noted since the point raised by the learned counsel for the appellant is that the document required registration inasmuch as the same does not amount to equitable mortgage by deposit of title deeds. The letter which, according to the plaintiff, created an equitable. mortgage in its favour reads as under :
"Herewith I append a fist of documents of title to my immovable properties which documents of title I have delivered over to you today with intent to create security thereon in favour of the Bank for all dues to the Bank in respect of fully secured loan' overdraft, key loan, cash credit key loan, open loan, bills purchased, cheque discounting and all other facilities which the Bank has allowed or may hereafter allow in the account of Seth Meghraj Parasram, at any or all of the branches of the Bank."
The list of documents found in the said exhibit discloses that all the documents relating to the mortgaged properties had been delivered to the pl4intiff/Bank on 9-9-1967 along with the letter which intended to create a security in favour of the plaintiff/Bank. The 1st defendant having not paid the amount within the stipulated time, plaintiff filed O.S. No. 95 of 1971 to recover the suit amount. After filing the suit, the plaintiff/Bank discovered that the 5th defendant/appellant purchased in Court auction on 13-6-1972 in Execution Case No. 90 of 1970 on the file of the City Civil Judge, Bangalore, the right, title and interest of the 1st 4efendant in the mortgage properties. In the circumstances, the 5th defendant was also made a party. to the suit by an application made some time in the year 1972. But. before making this application, the plaintiff having come to know that the 4th defendant, viz., Canara Banking Corporation Ltd. (who was given up by the plaintiff as per the order of the trial Court dt. 1-2-1975) had brought the mortgaged properties to %ale in execution of the money decree obtained by it against the 1st defendant in Ex. Case No. 90 of 1970 made an application under 0. XXI R. 58, C.P.C. on 28-7-1972 in the executing Court. In that application the plaintiff had stated that the executing Court should not accept the final bid of the decree holder, i.e., Canara Banking Corporation, and should order investigation into the claim of the plaintiff in the property attached by that Bank and brought to sale by it. In the affidavit filed by the plaintiff in support of that application, it had averred that the 1st defendant ha(l deposited title deeds relating to the mortgaged properties with a confirmatory letter dt. 9-9-1967 creating a mortgage by deposit of title deeds in favour of the plaintiff/Bank for a loan of R& 50,000/borrowed by him and since he the 1st defendant had failed to pay the amount secured by the mortgage, the plaintiff had filed 0. S. No. 95 of 1971 on the file of the trial Court and the same was pending; that the 4th defendant had deliberately omitted to mention the encumbrance in favour of the plaintiff in the sale publication and, therefore, the sale held on 13-6-102 was not valid. This application was disposed of by the trial Court on 18-8-1972. It is common ground that no enquiry was held as required under 0. XXI, R. 58, C.P.C. and the trial Court without assigning any reason made the 4101lowing order :
"I.A. 5 is dismissed No costs, for objection to I.A. 6. Call on 75/8."
It is only thereafter the plaintiff impleaded both Canara Banking Corporation and the 5th defendant as t)arties to the suit. But, in the course of the p roceedings before the trial Court, the plaintiff gave up the 4th defendant and the order giving up the 4th defendant has become final. it is not necessary for the purpose of this 3ppeal to go into the claim of the plaintiff against the 2nd and the 3rd defendants since the trial Court found that the 2nd and the 3rd defendants had not executed any valid documents in favour of the 1st defendant which were assigned to the plaintiff as security for the loan given to the 1st defendant.
4. So, the only point for consideration is whether the plaintiff's right as equitable mortgagee created be deposit of title deeds is affected by rule of lis pendens in as much as the very same properties which were the subject matter of execution proceedings in Execution Case No. 90 of 1970 were also the subject matter of the suit filed by the plaintiff against the 1st defendant and subsequently against the 5th defendant in O.S. No. 95 of 1971. As noticed earlier, the case of the 5th defendant is that it had purchased the property in Execution Case No. 90 of 1970 levelled against the 1st defendant in the year 1972 on representation that the property in question was free from encumbrance; ne0her the pendency of O.S. No. 95 of 1971 filed against the 1st defendant nor the doctrine of lis pendens as propounded under Section 52 of the Act affects his right. The other contentions raised by its learned counsel, though they were not specifically pleaded and did not form part of the pleadings, are that (1) there was no valid and legal mortgage in favour of the plaintiff by the 1st defendant since the document, Ex.P. 1, required registration in the light of-the provisions of S. 55(l)(f) of the Act; (2) if the mortgage is valid, S. 52 of the Act does not apply to the facts of the case; (3) the plaintiff having not filed a suit to set aside the order made against it under 0. XXI, R. 58 of the C.P.C., the suit filed by the plaintiff against the 1st and the 5th defendants was not maintainable; and (4) the plaintiff having given up the 4th defendant the provisions of 0. XXI, R. 92 are applicable to the proceedings and, therefore, the decree of the trial Court could not be enforced against the 5th defendant.
5. The lst point relating to the validity of the mortgage in question, as noticed earlier, does not form part of the plea ' dings. But, it was submitted by the learned counsel for the 5th defendant that in para. I of the written statement he had denied the execution of the document and, therefore, the plaintiff was bound to prove that the document in question was validly executed. What all the 5th defendant had stated in para. I of its written statement is :
"The contents of paras Nos. I to 6 are denied by this defendant since they are not relevant and concerned to this defendant. The plaintiff is put to strict proof for the said allegations."
In our view, a general denial does not meet the case (A the 5th defendant. For the first time the, point relating to the validity of the mortgage in question was raised in this Court. There was no issue before the trial Court on this question. That question is a mixed question of fact and law. Unless it is specifically pleaded and evidence is led in, it is not possible for this Court to give a definite finding as to the intention of the Ist defendant who according to the plaintiff had created the equitable mortgage by deposit of title deeds. Even otherwise, the letter as found in Ex.P. 1, in our view, does not require registration. The matter is no more resintegra in the light of two decisions, of the Supreme Court in Rachpal Mahraj v. Bhagwafidas. and in United Bank of India Ltd. v. Lekharam Sonaram and Co., . In the- former decision the document in question contained the following recitals :
"We write to put on record that to secure the repayment of the money already due to you from us on account of the business transactions between yourselves and ourselves and the money that may hereafter become due on account of such transactions we have this day deposited with you the following title deeds in Calcutta at your place of business at No. 7 Sambhu Mullick Lane relating to our properties at Samstipur with intent to create an equitable mortgage on the said properties to secure all moneys including interest that may be found due and payble by us to you on account of the said transactions."
In construing the document the Supreme Court observed that :
"The document purports only to record a transaction which had been concluded and under which the rights and liabilities had been orally agreed upon. No doubt it was taken by the respondents to show that the title deeds of the appellant's properties were deposited with them as security for the moneys advanced by them and to obviate a possible plea that the deeds were left with them for other purposes as indeed was contended by the appellant in the written statement, taking advantage of the non-registration of the memorandum in question. But that is far from intending to reduce the bargain to writing and make the document the basis of the rights and liabilities of the parties.
This principle was reiterated by the Supreme Court in the subsequent decision' viz., in United Bank of India Ltd. There the document in question creating an equitable mortgage by deposit of title deeds read as under :
"I hereby authorise my son Mr. Babulal Ram to deposit with you on my behalf at your Calcutta Office the following title deeds with a view to create an equitable mortgage on the said properties to make your advances in the A/C of M/s. Lakhararn Sonaram and Co., Giridih, better secured. I hereby further declare that I am the sole owner of the Giridih property as per schedule below and am legal joint heir with my sons dealing in the name of M/s. Lakharam Sonaram and Co. of the Malho property as described in the schedule below. I hereby further declare that both the properties described in the schedule are free from all encumbrances and nobody else has any claim, right or title to the properties."
Disagreeing with the High Court, the Supreme Court held :
"the document was not intended to be an integral -part of the transaction and did not, by itself, operate to create an interest in the immovable property and therefore the document does not require registration under S. 17 of the Indian Registration Act"
In our view, the facts of that case are applicable on all fours to the facts in this case. The document in question did not co template the execution of any further document for creating a mortgage in favour of the plaintiff. In the circumstances, the plea of the learned counselor the appellant that the document was not admissible in evidence and the suit has to be dismissed on that ground alone has no substance.
6. The next point for consideration whether non-fifing of the suit to set aside the order of the executing Court on I.A. 5 filed by the plaintiff is a bar to enforce the right of the plaintiff against the 1st and the 5th defendants under the Equitable mortgage. Learned counsel for the 5th defendant invited our attention to 0. XXI, R. 63, C.P.C. as it existed prior to the amendment in 1976. Order XXI, R. 63 reads as under:
"Where a claim or an objection is preferred, the party against whom an order is made may institute a suit to establish the right which he claims to the property in dispute, but subject to the result of such suit~ if any, the order shall be conclusive."
According to the learned counsel for the appellant, a combined reading of 0. XV, R. 58 and 0. X XI, R. 63 gives an indication that unless that unless the plaintiff sues for a declaration that the order made against it under 0., XXI, R. 58 is bad in law by filing a suit under 0. XXI, R. 63, it had no right to enforce the mortgage against the 1st defendant and consequently it could not proceed against the appellant. In our view, this argument is entirely misconceived. Order XXI, R. 63, C.P.C relates to a claim petition in execution and not to other rights of the parties which could be availed of by a separate suit. Order XXI, R. 58 enables a person interested in the subject matter of the property in execution proceedings to have the order of attachment raised on the ground that he has 'an interest in the property. The remedy under 0. XXI, R. 58, C.P.C. is a summary remedy and it is well settled that the executing Court has to hold a summary enquiry in order to satisfy itself whether the attachment of the property had been properly made. If that order goes against the person claiming the property he has a further remedy under 0. XXI, R. 63, C.P.C. by filing a suit within one year. But, in the instant case when the plaintiff filed the application under 0. XXI, k. 58 in the executing Court, it had already filed a suit against the 1st defendant for enforcing its. rights under the equitable mortgage and it is only with a view to see that the proceedings in the original suit are not complicated by any right that the 5th defendant may obtain in the execution case, it made the application under 0. XXI, R. 58, C.P.C. Dismissal of that application by a non. speaking order would not in any way take away its right in the earlier original suit filed b~ it against the 1st defendant and the 5th defendants. Therefore, it is futile for the 5th defendant to contend that the suit filed by the plaintiff which was pending against the 1st defendant was not maintainable, since it had riot filed a separate suit under 0. XXI, R. 63, C.P.C. for a declaration that the order made against it under 0. XXI, R. 58, C.P.C. was not binding on it.
7. The next point for consideration is whether it is permissible for the 5th defendant to contend that the 4th defendant should have been continued as. a party without deletion and on account of deletion of 4th defendant, he is left with no remedy as he cannot invoke 0. XXI, R. 92, C.P.C. Order XXI, n. 92(l) reads as under :
"Where no application is made under Rule 89, Rule 90 or Rule 9 1, or where such application is made and disallowed, the Court shall make an order confirming the sale, and thereupon the sale shall become absolute.
We are at a loss to understand how this provision could be pre7ssed into service for denying the right of the plaintiff to seek a . decree against the 5th defendant in the suit filed by it. The plaintiffs application under 0. XXI, R. 58 had been dismissed and therefore there was no occasion for it to make an application under 0. XXI, R. 89,90 or 91,C..P.C. and even assuming that this provision comes into play, it is well settled that there is no warranty of title in Court auction sales and so the order confirming the sale would not take away the right of the plaintiff to challenge that sale in separate proceedings. It should be further noticed that the 5th defendant was impleaded as an additional defendant by an application made under 0. 1, R. 10, C.P.C. Order 1, R. 10(2), C.P.C. provides that the Court may at any stage, of the proceedings, either upon or without the application of either party, and on such terms as may appear to the Court to be just, order that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the suit, be added. On the plain terms of 0. 1, R. 10(2), C.P.C. it was necessary for the plaintiff to bring the 5th defendant on record as an additional defendant, as a person interested, as by that time it had purchased the property in Court auction/sale. The words 49settle all the questions involved in the suit" cannot be given a wide meaning so as to defeat the very scope of the suit filed by the plaintiff. The words "all the questions involved in the suit" had come up for consideration in certain decisions rendered by other High Courts and in our view the questions involved would not mean disputes as between co-plaintiffs or co-defendants in the suit. In Vaithilinga Pandara Sannadhi v. Sadasiva Iyer, AIR 1926 Mad 836, the Madras High Court has observed thus : -
"Thus when 'A' institutes a suit on title to recover certain property from 'B' 'C' should not be made additional plaintiff if 'B' should object to it, except perhaps in the case of one possible exception of the title to the property between A and C being alternative in its proper sense. The principle is even stronger in the case of a plaintiff as against whom another defendant is sought to be added. It is the plaintiff that comes to Court alleging a cause of action as against him. The very basic principle of judgments inter partes is that the judgments are not judgments in rem but declaratory and operative only as between them. The plaintiff being generally dominus litus, I fail to see on what principle of justice he can be compelled to fight against some other litigant not of his own choice unless such a process is required by a positive rule of law.
The whole scheme of the Civil Procedure seems to me to point to a suit being regarded as a suit for relief as against definite defendant as, as a trial being one only as between. the parties and an adjudication as. one only binding them. If a plaintiff should claim certain property and it should be regarded that the question involved in the suit is generally whether he is the owner of the property and not whether as against any other particular persons, he is entitled to certain rights over property, very serious consequences are sure to ensue and procedure in our Courts of law is certain to become exceedingly complicated and much more disastrously prolonged than it is at present., In Harishchandra Narayan Vinekar v. Kumma Vithoba Komarpant, AIR 1922 Born 454 the Bombay High Court has ruled that:
"Where I he defendant was asked by plaintiff to p ay to plaintiffs creditor the rent due from him to plaintiff and defendant paid it to the creditor, who however also recovered the debt from the plaintiff under a decree obtained by him against plaintiff, held in a suit by plaintiff for rent, against defendant the creditor is riot a proper party."
The grievance of the 5th defendant is that as plaintiff has given up the 4th defendant he has lost his remedy. ifany, against him and therefore, it cannot be saddled with the liability. As noticed earlier, any grievance that the 5th defendant can have as against the 4th defendant cannot be the subject matter of adjudication in this proceedings. No doubt, the sale proclamation issued by the-executing C6urt showed that the property was free from all encumbrances. In view of the well established principle that there is not warranty of title in Court auction,' we are unable to comprehend the remedy which, the 5th defendant was entitled to in this proceeding and if there is any other alternative remedy or forum, this decision will not come in its way to enforce -the same. Therefore, the 5t 'th defendant cannot make any grievance against the plaintiff on that score. If at all it has any right against the 4th defendant, it can work it out by a separate proceeding and not in the proceedings instituted by the plaintiff against the 1st defendant on the basis of the equitable mortgage created in its favour.
8. That takes us to the last point for consideration, that is, whether Section 52 of the- Act applies to the facts of this case.
Mr. Gunjal, learned counsel for the appellant, had earlier relied on the decision of this Court in Syndicate Bank (ILR (1986) 2 Kant 3776) and contended that the rule of lis pendens is not applicable to the Court action sale. He has very fairly submitted now that that decision does not appear to be correct. That is the reason he did not submit any further arguments on this point. However, as this decision operates as binding precedent on subordinate courts in cases that come up before them for consideration very frequently, in our view, it has become necessary for us to state the law applicable to Court auction sales in the light of the two decisions of the Supreme Court in Samarendra Nath Sinha v. Krishna Kumar Nag, and Kedarnath Lai v. Sheonarain, . These two decisions of the Supreme Court were referred to by the learned Judge in Syndicate Bank. But, the learned Judge was of the view that the later decision of the Supreme Court in Raghavachar v. Lakshminarasamma, had diluted the principles laid down in Samarendra Nath and Kedamath. The learned Judge has observed, after referring to Raghavachar, as follows .
"This decision appears to have diluted the principles laid down in Samarendra Nath S inha v. Krishna Kumar Nag an4l Ked arnath v. Sheonarain. In view of the decision in the said Raghavachar's case and in view of the ruling in Varki Chacko v. Ouseph Pramena it appears to me that the rule of lis pendens may not strictly apply to previous Court auction sales."
It may be noticed that the decision of the Division Bench of this Court in Kamalarnma V. K. Srinivasa Rao (1966) 1 Mys LJ 451 referred to by the learned Judge was rendered by the Division Bench prior to the decision of the Supreme Court in Samarendranath and therefore the ruling in that case must be confined to the facts of that case. The distinction between decree-holder purchasing the property in,execution of a,money decree and the decree-holder purchasing the property in execution of a mortgage decree are clearly brought out in the decisi6n of the Privy Council in Jadunath Roy, v. Parameswar Mullick, AIR 1940 PC 11. Sir George Rankin speaking for the court ruled :
"While the purchaser at an execution sale under a mere money decree gets no more than the right, title and' interest of the judgment-debtor at the date of the sale, the purchaser under a mortgage decree gets the right, title and interest in the mortgaged subjects which the mortgagor had at the date of the mortgage and charged thereby. Buying the mortgaged property free from incumbrances he gets, as it is sometimes put, the title both of the mortgagee and of those interested in the equity of redemption. He is not a mere successor-in-interest of the owner of the equity of redemption at the date of the sale."
The doctrine of lis pendens in relation to mortgaged property came up. for consideration before the Privy Council in Pararnesari Din v. Ram Charan, AIR 1937 PC 260.The Privy Council observed as follows :
"Where the mortgagor transfers the mortgaged property pending the suit for foreclosure on the mortgage and the transferee takes actual possession of the same~ the mortgagee decree. holder on the making of the final decree can proceed to, execute the decree against the transferee for recovery of possession of the property transferred to him in as much as the transferee is on account of the transfer pendente lite, a representative in-interest of the mortgagor judgment-debtor and is bound by the decree passed against him."
This enunciation of law was followed by the Supreme Court in Samarendra Nath Sinha. In para. 16 of its judgment, the Supreme Court observed as follows:
"It is true that S. 52 strictly speaking does not apply to involuntary alienations such as court sales but it is well established that the principle of lis pendens applies to such alienations. See Nilkant v. Suresh C6ndra, (1985) 12 Ind App 171 (PC) and Motilal .v. Karrabuldin, (1891) 24 Ind App 170 (PC). It follows that the respondent having purchased from the said Hazra while the appeal by the said Hazra against the said preliminary decree was pending in the High Court, the doctrine of lis pendens must apply to his purchase and as aforesaid he was bound by the result of that suit".
This decision was followed by the Supreme Court in its subsequent decision in Kedarnath. Chief Justice Hidayatullah speaking for the Court observed as follows:
"If the property was acquired pendente lite, the acquirer is bound by the decree ultimately obtained in the proceedings pending at the time of acquisition. This result, is not avoided by reason of the earlier attachment. Attachment of property is only effective in preventing alienation but it is not intended to create any title to the property. On the other hand, S. 52 places a complete embargo on the transfer of immovable property right to which is directly an4 specifically in question in a pending litigation. Therefore, the attachment was ineffective against the doctrine."
In para. 17 of the judgment, the learned Chief Justice observed thus "It is true that Section 52, strictly speaking, does -not apply to involuntary alienations such as court sales but it is well -established that the principle of lis pendens applies to such alienations."
That takes us to the decision on which Kulkarni, J. relied in Syndicate Bank. In R 4ghavachar, a decision rendered by a Bench of 2 judges of the Supreme Court, it dealt with the provisions of S. 60 of the Act touching the rights of the prior mortgagee when he himself purchased the mortgaged property. The facts of the case. are found in para. 2 of its judgment. The Supreme Court ruled that the prior mortgagee when he himself purchased the mortgaged property, becomes entitled as assignee of the equity of redemption to redeem the subsequent mortgage& If there is a conflict between the Tight of the prior mortgagee as assignee of the equity of redemption to redeem the puisne mortgagee and the right of the puisne mortgagee to redeem the prior mortgagee, the right of the prior mortgagee takes priority. Where it was found that the prior mortgagee had the right to redeem the subsequent mortgages the transferees of the prior mortgagees interest were entitled to possession of the property. This decision did not deal with S. 52 of the Act nor any question was raised in that case as to the applicability of the doctrine of lis pendens. Therefore, with great respect to the learned Judge we are unable to discern any ratio in Raghavachar which would 'dilute' the rule of lis pendens enunciated in Samarendranath and Kedarnath which dealt with the applicability of S. 52 of the Act to Court auction sales. The ruling of the learned Judge is that S. 52 of the Act 6 t may be strictly not applicable to Court auction sale." That observation must be treated as o biter dicta since there is no positive declaration of law on the applicability of S. 52 of the Act to Court auction sales. As noticed earlier, since that observation runs counter to the decisions of the Supreme Court, in Samarendra Nath Sinha and.Kedamath that decision should be confined to the facts of that case. That is the very reason, the learned counsel fo the appellant very fairly conceded that that decision does not state the law correctly. Accordingly, the appellant having. purchased the suit property during the pendency of the suit against the 1st defendant, it is bound by the decree against the 1st defendant.
9. For these reasons, the appeal fails and is dismissed. But, in the circumstances of the case parties are directed to bear their own costs.
10. In the view we have taken, I.A. I does not arise for consideration and the same is dismissed.
11. Appeal dismissed.