1. This appeal is directed as against the order dated 30.12.2004 in TA No. 559/2001, passed by the DRT-II at Chennai.
2. The defendants 5 to 9 in the OA, who are the L.Rs. of the 4th defendant, have preferred this appeal.
3. The respondent Bank filed the suit for recovery of Rs. 28,89,943.61 together with future interest at the contract rate. The 1st defendant in the OA, viz. Sri Palaniappa Transports, was a firm owning fleet of lorries and was carrying on business as carriers. The defendants 2 to 4 were the partners of the 1st defendant firm. The 4th defendant viz. S.Thiyagarajan, was in charge of the 1st defendant firm at Madras. The appellants who are defendants 5 to 9, are the legal heirs of the 4th defendant viz. S. Thiyagarajan, and defendants 10 to 12 are the legal heirs of the 2nd defendant viz. R.M. S. Chockalingam.
4. At the request of the 1st defendant firm, various facilities were granted by the plaintiff Bank. The 1st defendant firm had the loans on equitable mortgage, and by hypothecation of lorries. The defendants also subscribed to various chits conducted by the Chits Department of the plaintiff Bank and priced those chits and received the price money on the security of their lorries and by extending the mortgage over the immovable properties in respect of the chit transaction, In the above said manner, the defendants availed first loan from the Godown Street Branch of the Plaintiff Bank on 21,11.1973 for Rs, 4,90,000/- and executed a Promissory Note for the said amount agreeing to repay the same together with interest @6% p.a. over and above the rate of the Reserve Bank of India (RBI), with a minimum of 13% p.a. with quarterly rests. That in respect of the said loan, the respondent Bank made a claim of Rs. 9,46,929.07. The 1st defendant also availed the second loan from the plaintiff's Godown Street Branch on 3.8.1974, for a sum of Rs. 2,50,000/- and executed promissory note, promising to repay the same together with interest @ 8% p.a, over and above the RBI rate with a minimum of 17% p.a. with quarterly rests. That in respect of the said loan, the defendants are liable to pay a sura of Rs. 6,19,277.42. The defendants have also borrowed Rs. 1,03,0007- on 16.7,1973, by hypothecating lorry TMI-2043, Rs. 71,8457- on 17.8.1974 by hypothecating lorry TNU-6548, Rs. 1,20,9557- on 27.8.1974 by hypothecating lorry MYA-7351, Rs. 1,01,5007- on 30.8.1974 by hypothecating lorry TNU-6640, and Rs. 1,21,0907- on 27.8.1974 by hypothecating lorry MYA-7353. In respect of hypothecation of lorries, the defendant are liable to pay a sum of Rs. 3,61,534.67. That in respect of the amounts subscribed to the chits conducted on various dates in Thambu Chetty Street Branch, the defendants are liable to pay a sum of Rs. 3,65,4007-. That in respect of the Chits Subscribed in Kutchery Road, Mylapore Branch, the defendants are liable to pay Rs. 4,18,991.25. That in respect of the Chits subscribed in the Coimbatore Branch, the defendants are liable to pay Rs. 1,08,577.40. That in respect of the chits subscribed in Rajapalayam Branch, the defendants are liable to pay Rs. 69,283,80. That in all these accounts, the defendants were found liable to pay a sum of Rs. 28,89,943.61 for which the respondent Bank filed the suit and the same was decreed. Aggrieved by the same, this appeal has been filed.
5. The appellants assailed the order of the DRT broadly on the following grounds (1) Misjoinder of causes of action i.e. clubbing of the amount due under the hypothecation and also under the chit transaction together and claim was made and the same is not maintainable and the DRT has no jurisdiction to try the OA. (2) The equitable mortgage dated 22.11.1973 created by the defendants by deposit of title deeds and the execution of the memorandum of title deeds took place contemporaneously i.e. on one and the same time and day, and it is unstamped and unregistered and, therefore, it is invalid under law.
(3) Sale proceeds of the hypothecated lorries were not given credit to and the claim made by the respondent Bank is barred by time.
6. Facts were not detailed except to the extent, which are necessary for the disposed of the appeal, as the availing of the first and second loans, hypothecation of lorries and chit transactions are not disputed.
7. The learned Advocate for the appellant has vehemently contended that clubbing of the liability arising out of the mortgaged vehicle loan and chit transactions are not maintainable as it is a classic example of misjoinder of causes of action. The liability claimed under the chit transaction would not fall within the meaning of 'debt' as defined under Section 2(g) of the RDDB&FI Act, 1993, and when the chit liability is not a debt, the claim made in the OA is unsustainable.
8. It is also stated that the properties situated at Basin Water Works, Madras, Kilpauk Garden, Madras, and the property in Bangalore, were all included in the OA and from the pleadings, there is no indication that the respondent Bank had obtained leave from the High Court of Madras to institute a suit at Madras, as required. The production of link letters in respect of Chit Nos. M9/13, J1/35, J1/36, M1/32 and M5/35, the property at Bangalore was mortgaged by S. Thiyagarajan (4th defendant) and he had no right to mortgage the assets of the firm to bind the firm as well as its partners and, therefore, the claim is not sustainable.
The appellant relied upon the case of Dhula Bhai v. State of Madhya Pradesh and Anr. 1968 (22) STC 416, wherein the imposition of tax under Section 5 of the Madhya Bharat Tax Act, 1950, came for consideration and it was held that such a levy was not barred by Section 17 of the Act, wherein it was incidentally considered, "Where there is an express bar of the jurisdiction of the Court, on exemption of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the Civil Court." In Smt. Bismillah v. Janeshwar Prasad and Ors. AIR 1990 SC 540, question arose for consideration in that case was whether the jurisdiction of the Civil Court to entertain appellant's suit before the Additional Civil Court, Saharanpur, for cancellation of certain sale-deeds respecting agricultural lands, and for possession is barred by Section 331 of the U.P. Zamindari Abolition and Land Reforms Act, (1951 Act), and it was held, "It is settled law that the exclusion of the jurisdiction of the Civil Court is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied. The provisions of law which seek to oust the jurisdiction of Civil Court needs to be strictly construed."In State Bank of Bikaner & Jaipur v. Ballabh Das & Co. and Ors. I wherein a question arose for consideration of the Supreme Court whether the Bank had the right to move the Debts Recovery Tribunal even before deciding whether the disputed amounts have become due and payable and that the suit filed by the Bank was pending before the Civil Court and during which period the RDDB&FI Act, 1993 was enacted and came into force. It was held that it is suffice to prove that the Bank has alleged in the suit that the amounts are due to the Bank from the respondents and the liability of the respondents has arisen during the course of the business activity and it need not be determined by the Civil Court and those suits should be treated as applications for forwarding to the Tribunal concerned.In United Bank of India v. The Debts Recovery Tribunal and Ors. I (2000) BC 662, wherein the Bank filed the suit before the High Court claiming different reliefs against three defendants and pending suit, the RDDB&FI Act, 1993 came into force. The suit stood transferred to the DRT. The respondent moved application contending that the Tribunal had no jurisdiction to entertain the suit in question. The Tribunal disposed of the applications, holding the Tribunal has jurisdiction- to decide claims of the plaintiffs and the same was challenged before the Supreme Court and the Hon'ble Supreme Court held in Para 12, "There cannot be any dispute that the expression 'debt' has to be given the widest amplitude to mean any liability which is alleged as due from any person by a Bank during the course of any business activity undertaken by the Bank either in cash or otherwise, whether secured or unsecured, whether payable under a decree or order of any Court or otherwise and legally recoverable on the date of the application.... It is imperative that the entire averments made by the plaintiff in the plaint have to be looked into and then find out whether notwithstanding the specially created Tribunal having been constituted the averments are such that it is possible to hold that the jurisdiction of such Tribunal ousted. With the above said principle in mind, on examining the averments made in the plaint, we have no hesitation to come to the conclusion that the claim in question made by the plaintiff is essentially one for recovery of a debt due to it from the defendants and, therefore, it is the Tribunal which has the exclusive jurisdiction to decide the dispute and not the ordinary Civil Court." In State of A.P. v. Manjeti Laxmi Kantha Rao (Dead), By LRs and Ors.
point raised before the Supreme Court was, "If during the pendency of an appeal in the civil suit concerning a certain property, the prescribed authority (the Deputy Commissioner) under the A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1966, comes to the conclusion that the property is not part of a charitable institution, nor subject to an endowment and his order is not challenged according to the procedure stipulated in the Act, should the appeal be disposed of on the basis of the decision by the prescribed authority?" In answering that question, the Supreme Court held, "The normal rule of law is that Civil Courts have jurisdiction to try all suits of civil nature except those of which cognisance by them is either expressly or impliedly excluded as provided under Section 9, CPC but such exclusion is not readily inferred and the presumption to be drawn must be in favour of the existence rather than exclusion of jurisdiction of the Civil Courts to try a civil suit. The test adopted in examining such a question is (i) whether the legislative intent to exclude arises explicitly or by necessary implication, and (ii) whether the statute in question provides for adequate and satisfactory alternative remedy to a party aggrieved by an order made under it." In Dhulabhai v. State of M.P. (supra), it was noticed that, "Where the statute gives a finality to the orders of the special Tribunals the jurisdiction of the Civil Courts must be held to be excluded if there is adequate remedy to do what the Civil Courts would normally do in a suit and such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory Tribunal has not acted in conformity with the fundamental principles of judicial procedure," 9. In answer to the above said contention, the learned Advocate for the respondent Bank has submitted that Bank of Madura was a single entity and it was carrying on business through various branches and after the scheme of amalgamation sanctioned by the Reserve Bank of India, Bank of Madura amalgamated with ICICI Bank Ltd. The respondent Bank originally filed a suit before the High Court at Madras on 21.4.1982 as C.S. No.76/1983. At the time of filing of the suit, the respondent Bank had applied for necessary leave of the High Court under Clause 12 of the letters patent and the same is pleaded in Para 48 of the plaint and the said leave was also granted by the High Court of Madras. Consequent to the constitution of the DRT, the suit was transferred to the DRT and it was taken on file and renumbered as TA No. 10/1996 and on further transfer to DRT-II at Chennai, it was re-numbered as TA No. 559/2001.
Hence the O.A. is maintainable.
10. The respondent further submitted that the chit business conducted by the Bank is a Banking transaction governed by the Banking Regulation Act, and the same is not prohibited as contended by the appellant and relied upon the case of C. Varamanl David v. Bank of Madura Ltd. AIR 1983 Madras 15, wherein it was held, "A fair consideration of this section as well as the definition of 'Banking' in the Banking Regulation Act, 1949, would leave no doubt in any one's mind that chit fund transaction indulged in by a Banking company at any rate partakes the character of a Banking activity. Indeed a Chit or Kun reflects the genious of the southern peoples of this country. A chit combines in itself two economic urges commonly appearing in people, namely the urge to save and urge to borrow. The mechanism of chit funds combines and taps both the urges in an individual with a commendable economy of costs in the process... the chit fund transaction is, in its essence a transaction of a kind which a Banking company can legitimately undertake within the governing provisions of the Banking Regulation Act, 1949." Hence it is submitted that claim of Chit Fund amount in the OA, along with other amounts due by the appellants is proper.
On a careful consideration of all the judgments relied upon by the appellants and the rival submissions of both the parties, it would be made clear that the suit was filed before the High Court of Madras and at the time of filing of the suit itself, the respondent Bank applied for leave of the Court to institute the suit before the High Court and the said leave was also granted. Pursuant to the passing of the RDDB&FI Act, 1993, and by virtue of Section 31 of the said Act, which states, "(1) Every suit or other proceeding pending before any Court immediately before the date of establishment of a Tribunal under this Act, being a suit or proceeding the cause of action whereon it is based is such that it would have been, if it had arisen after such establishment within the jurisdiction of such Tribunal, shall stand transferred on that date to such Tribunal." That apart, Section 19 of the RDDB&FI Act, 1993, states that, "That Bank or financial institution may make an application to the Tribunal to recover any debt from any person within the local limits of whose jurisdiction (a) the defendants, or each of the defendants where there are more than one, at the time of making the application, actually arid voluntarily resides or carries on business or personally works for gain; or (b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business or personally works for gain.
Admittedly, the 1st defendant, which is a firm and the defendants 2 and 4 who are the partners, are the resident of Chennai, and hence the OA is maintainable before the Tribunal at Chennai. The chit, business conducted by the Bank is a Banking transaction governed by the Banking Regulation Act, and the same is not prohibited under the said Act. As such, the amount due in respect of chit transactions is a 'debt due to the Bank, within the meaning of Section 2(g) of the Act and the Bank's claim is maintainable. The value of the chit amount, amount paid by the defendants, dividend earned and the amount due by the defendants are clearly stated in the statement of accounts furnished by the Bank and hence the contention of the appellants otherwise is rejected.
11. The next contention of the appellants is that the mortgage created by the defendants by deposit of title deeds dated 22.11.1973, is not valid under law for the reason that the deposit of title deeds and the execution of Memorandum of Title Deeds took place simultaneously i.e.
on one and the same time and day and, therefore, the equitable mortgage should have been registered, but whereas it is not and hence the equitable mortgage executed by the appellants is not valid. In support of this submission, the appellants relied upon the case of H.G.Nanjappa v. MFC Industries (P) Ltd. wherein it was held that, "Under Section 17 of the Registration Act, by Clause (b) thereof, non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether vested or contingent of the value of one hundred rupees and upwards, to or in immovable property are compulsorily required to be registered." But in the instant case, no registered document was there creating a document and, therefore, the equitable mortgage said to have been created is not valid. The appellant also relied upon the case of Rachpal Maharaj v.Bhagwan Das Daruka and Ors. AIR (37) 1950 SC 272, wherein it was held, "A mortgage by deposit of title deeds is a form of mortgage recognised by Section 58(f), T.P. Act, which provides that it may be effected in certain towns (including Calcutta) by a person "delivering to his creditor or his agent documents of title to immovable property with intent to create a security thereon." That is to say, when the debtor deposits with the creditor the title deeds of his property with intent to create to create a security, the law implies a contract between the parties to create 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." The case of Obla Sundarachariar and Ors. v. Narayana Ayyar and Ors. (Vol. LIV) The Indian Law Reports 257, and the case of United Bank of India v. Lekharam Sonaram & Co. and Ors. were also relied upon for the very same proposition.
12. On the contrary, the learned Advocate for the respondent Bank would contend the deposit of title deeds and execution of the Memorandum of Title Deeds were not contemporaneous and, therefore, the Memorandum of Deposit of Title Deeds executed by the appellants does not require any registration. Only when parties execute such memorandum intending to reduce the transaction in writing and if it is done contemporaneously, it will require registration in so far as it declares the creation of the mortgage. However, the position would be different if the execution of the Memorandum is not contemporaneous and it only confirms the fact of ex post facto. The Supreme Court in the case of United Bank of India v. Lekharam Sonaratn & Co. (supra), has clearly held that, "When the debtor deposits with the creditor title deeds of his property with an intent to create a security, the law implies a contract between the parties to create a mortgage and no registered instrument is required as under Section 59 as in other classes of mortgage. It is essential to bear in mind that the essence of a mortgage by deposit of title deeds is the actual handing over by a borrower to be lender of documents of title to immovable property with the intention that those documents shall constitute a security which will enable the creditor ultimately to recover the money which he has lent." From the above, it is made clear that only when the deposit of title deeds and execution of the Memorandum of Document are contemporaneous and simultaneous, the law requires that such a memorandum should be registered. Otherwise, it is not. In our case, there is no material to show that the Memorandum of Agreement was executed contemporaneously and therefore, the contention of the learned Advocate for the appellants that the deposit of title deeds is not proper for want of registration cannot be accepted.
13. The learned Advocate for the appellants has submitted that the sale proceeds of the hypothecated lorries were not given credit to and, therefore, the claim of the respondent Bank is not correct. The respondent Bank filed a statement of account in respect of the hypothecation of lorries and also the amount realised by the sale of the lorries and the statement of account was not at all disputed by the appellants. When the accounts submitted by the respondent Bank was not disputed the Court can easily draw an inference that the statement of accotmt furnished by the respondent Bank is true and valid and there is no error at all. As such, the contention of the appellant that the sale of the hypothecated lorries were not given credit to, cannot be accepted.
The defendants have also executed revival documents/acknowledgement of liability on various dates from 1976 till December, 1981, and the suit was filed on 21.4.1982 itself and, as such, the contention of the appellants that the suit is barred by time cannot at all be accepted, 14. In the result, the appeal is dismissed and the order and judgment dated 30.12.2004 passed by the DRT-II at Chennai is confirmed. No costs. I.A. 209/2005 is dismissed as unnecessary.