J. Kimatrai and Co. Vs. Bank of India - Court Judgment

Excerpt:
company - equitable mortgage - petitioner firm took loan from respondent bank - deposited title deeds of property with bank to create equitable mortgage for securing loan - for purpose of sale of property petitioner demanded return of title deeds of property - bank was paid its dues - bank released firm partially from charge of equitable mortgage in respect with first floor - bank then insisted for another amount so as to release title deeds - petitioner sought writ as it was arbitrary discretion by bank authorities - mortgage transaction is matter of contract - jurisdiction is vested in court which was to decide suit of mortgage relating to real terms and conditions of contract for enforcement of special rights of mortgagor and mortgagee - held, reliefs sought in matter not sustainable. - - .7. they submitted that in the light of this, the bank was justified in asking for the repayment of all the dues due from the present petitioners as well as from their partners in various accounts, which they had operated for borrowing amounts in various branches of the respondent-bank. in any event, such a question is a disputed question of fact and it is not possible for us in a writ petition like this, which is not an action founded on the mortgage for the redemption of the mortgage, to decide this question in one way or the other. when intricate questions of fact and law are required to be considered while adjudicating upon the rights of the parties under a transaction of mortgage, it is certainly not in the interest of justice to adjudicate upon those rights in a proceeding like this.m.s. vaidya, j.1. heard mr. k. s. cooper with mr. u. r. timble, learned counsel for the petitioner and mr. m. s. usgaonkar with mr. s. s. kantak, learned counsel for the respondent. 2. this writ petition has been filed under articles 14, 19 and 226 of the constitution of india, by a firm, who had mortgaged their property at bombay with the respondent-nationalised bank, under a mortgage by deposit of title deeds, praying for a writ of mandamus directing the respondent to forthwith hand over to the petitioner all the title deeds deposited with therein as per exhibit 'b' attached to the petition, along with the costs at the petition and other reliefs. notice before admission was given to the respondent and an affidavit-in-reply was filed on their behalf. according to the petitioners, they had taken several loans and facilities including overdraft facilities from the respondents and were operating the aforesaid accounts at kalbadevi branch, bombay. they had created an equitable mortgage by depositing title deeds in favour of and with the respondents through their panjim branch. the title deeds were lying with the panjim branch of the respondents' bank. the petition was, therefore, filed at panjim, goa. 3. the petitioners contended that they had availed of the following facilities from the respondent-bank : (1) cash credit-hypothecation of stocks. (2) inland b/p. (3) import l/c dp/da cum pledge of imported goods. (4) indemnity bond import goods favouring railways. (5) demand loan account no. 1. (6) demand loan account n. 2. 4. it is pleaded that in respect of the said facilities, the petitioners agreed to create an equitable mortgage of the building known as 'kimatrai building, situated at maharshi karve road, bombay, and, in their letter dated july 7, 1989 (exhibit 'a'), they had stated that they had agreed to create an equitable mortgage to secure the aforesaid facilities. when this proposal was accepted, the equitable mortgage was created by deposit of title deeds on september 9, 1989, at goa. the list of the documents so deposited is at exhibit 'b'. according to the petitioners after the sanction of an initial loan of amount rs. 15 lakhs, an additional facility of further amounting to rs. 62 lakhs was made available to the petitioners as against the equitable mortgage in question. thereafter, the respondents carried on renovation of their 'kimatrai building' and they sought the return of the title deeds deposited with the respondents for the purpose of facilitating the sales, leases, etc., in respect of various portions of the said property by a letter dated november 15, 1991 (exhibit 'c'). the respondents had, then, informed the petitioners that the bank could release the equitable mortgage and return the documents, once all the dues of the bank due from the petitioners were repaid and liquidated. it is contended that, accordingly, with the consent of the bank, the first floor of the building was sold on repayment of rs. 407 lakhs in full and final payment of the entire dues with interest. accordingly, the bank issued a letter dated may 20, 1994, confirming that their charge by way of equitable mortgage as far as the first floor of kimatrai building, stood released. the petitioners felt aggrieved by this partial release of the first floor and insisted upon the release of the entire property and return of the documents. considerable correspondence was exchanged between the parties and as a result, it transpired that the respondent-bank insisted upon satisfaction of the loans taken by the petitioners or their partners in various other branches, namely, (rs. in crores)(a) osaka branch, account of j. kimatrai and co. (j) ltd. 18.27(b) osaka branch, account of j. k. group (j) ltd. 00.30(c) singapore branch, account of j. kimatrai and sons pvt. ltd. 09.65(d) hong kong branch account of j. kimatrai and sons ltd. 02.685. the bank, thus, insisted upon the repayment of a total amount of rs. 30.90 crores along with interest due thereon before the title deeds could be released. according to the petitioners, this was an arbitrary exercise of the discretion by the bank authorities and their refusal to release the deposited title deeds and the property, namely, kimatrai building, was contrary to the provisions of articles 14 and 19 of the constitution of india. therefore, the present writ petition is filed under article 226 of the constitution of india, for the directions, as stated at the outset. 6. on behalf of the respondents, it was contended in their affidavit-in-reply that this court had no jurisdiction to entertain the writ petition particularly because, the mortgaged property was located at bombay as also because, the entire transactions of advances, etc., had taken place at bombay. on the merits, it was contended that by letter dated july 7, 1989 (exhibit 'a'), the petitioners had nominated and appointed mr. narayan s. kimatrai, representing karta of n. s. kimatrai (huf), one of the partners to attend the required branch of the bank of india and to record oral assent on behalf of the partners and firms to the bank, to hold the title deeds, the particulars of which were set out in the said letter, to record oral assent for creation of equitable mortgage of the building and furniture as security for the due repayment. the respondents contended that the intention expressed by the aforesaid representative has been recorded in the books of the respondent-bank by way of oral assent and the equitable mortgage was created by the petitioners for the following purposes : 'at the time of such deposit shri narain shobhraj kimatrai, hindu undivided family, one of the partners stated that they made the deposit of original title deeds and documents on behalf of the company and all its partners with intent to create security in favour of the bank by way of equitable mortgage over the said immovable property (comprising land and building and other structures now or hereafter to be erected, fixtures and fittings now or hereafter to be erected or installed thereon) for the due repayment by the firm to the bank at kalbadevi branch on demand the balance from time to time due in the said cash credit hypo of stocks with a limit of rs. 25 lakhs, cash credit pledge of stocks cum letter of credit facility with a limit of rs. 20 lakhs, inland bills purchase facility with a limit of rs. 35 lakhs, indemnity bond (for 8 railways) with a limit of rs. 20 lakhs and demand loan facility with a limit of rs. 95 lakhs, granted to the company with interest in cash credit hypo of stocks and pledge of imported goods under l/c at the agreed rate of interest of 6.5 per cent. obr minimum 16.5 per cent. per annum with quarterly rates or at such other rate as may be notified to the firm by the bank from time to time . . . for the due repayment of any advance of any nature now due or pending or that may be made or become due hereafter from time to time either in respect of or under the said cash credit amounts/letter of credit cum pledge/bills purchased/indemnity bond/demand loan or in any other amount or amounts of the company or of the partners or of any one or more of them and whether singly or jointly with another or others and whether at kalbadevi branch or any other branch or office of the bank and also for the due observance, performance and discharge by the firm and/or its partners or any one or more of them of any obligation to the bank which may give rise to the pecuniary liabilities. . .' 7. they submitted that in the light of this, the bank was justified in asking for the repayment of all the dues due from the present petitioners as well as from their partners in various accounts, which they had operated for borrowing amounts in various branches of the respondent-bank. the respondents produced along with their affidavit-in-reply a xerox copy of the minutes recorded at the aforesaid meetings (exhibit r-1). it was, therefore, contended that the aforesaid petition could not be entertained for grant of the reliefs as sought by the petitioners. 8. mr. cooper, learned counsel for the petitioners, took us through the copies of various letters annexed to the petition for pointing out that the mortgage in question was intended to be only to secure the two debts referred to in the petition and that after the amount of rs. 407 lakhs had been deposited by the petitioners with the bank in satisfaction of their said accounts and the other accounts operated in india, the respondent-bank started insisting upon extending the scope of the mortgage to cover their other liabilities. in short, the contention was that the bank had since modified its stand from time to time and had ultimately insisted upon withholding title deeds deposited with them for the satisfaction of the loans which were, indeed, not covered by the equitable mortgage. it was submitted that this was an arbitrary exercise of the discretion by the bank authorities and that, therefore, this court was entitled to grant discretionary reliefs. mr. cooper, also submitted that the objection regarding jurisdiction was not sustainable at all, in as much as, the initial letter dated july 7, 1989 (exhibit 'a'), was addressed to the panjim branch of the bank and it was there that the transaction of mortgage had taken place. he submitted that, in fact, the title deeds were deposited with the panjim branch of the respondent-bank and, further, inasmuch as, the petitioners were seeking a direction for return of the said document from the panjim branch, a direction which was to act in personam, this court definitely had-jurisdiction to entertain the writ petition in question and to decide it. 9. mr. usgaonkar, relied upon the provisions contained in section 16 of the civil procedure code and maintained that as the transaction was one of mortgage of immovable property only, the court where the property was mortgaged could have jurisdiction in view of section 16(a) of the code of civil procedure. 10. the objection regarding the jurisdiction raised by shri usgaonkar does not appeal to us much, particularly because, as contended by mr. cooper, the documents in question stood deposited with the panjim branch and if at all any direction had to be given for return of the documents, the said direction would be operative against the panjim branch, who had been all along in physical possession of the documents in question. ex facie, therefore, it need not be said that this court had no jurisdiction to entertain the present writ petition. 11. as regards the main contention urged by mr. cooper, it may be noted that in the case of a simple mortgage as also in the case of a mortgage by deposit of title deeds the loan taken against the mortgage involves a personal liability of the mortgagor unless the nature and the terms of security negative any personal liability. in nityananda ghose v. rajpur chhaya bani cinema. ltd., : air1953cal208 , it was pointed out that by the combined operation of sections 96 and 58(b) of the transfer of property act, an equitable mortgage must be held to be a mortgage where the mortgagor binds himself personally to pay the mortgage money and the mortgagee has a right to sue for the mortgage money within the meaning of section 68(1) (a) of the transfer of property act. when such liability is a personal liability, it is certainly possible for the mortgagee to make orally his property liable in the case of an equitable mortgage for the debts which were initially not covered by the equitable mortgage itself. true it is that section 93 of the transfer of property act, imposes some prohibition on tacking. but, the said section refers to the rights of the successive mortgagees inter se and has no bearing on the questions which may arise between the mortgagor and mortgagee, with reference to consolidation, or tacking or adding expenses to the mortgage debt under section 61 or 72. indeed, in girendra coomar' dutt v. kumud kumari dasi ilr [1898] cal 611, the defendants had executed a mortgage in favour of the plaintiff, and handed over to him the title deeds of the mortgaged property. subsequently, the plaintiff advanced a further sum to the defendants, who agreed that the plaintiff should retain the title deeds already held by him as a security for the repayment of the further advances. there was no fresh deposit of the deeds. it was held on these facts, that the plaintiff was entitled to be declared an equitable mortgagee in respect of such further advances of amounts. this position of law will have to be borne in mind while considering the case of the present petitioners in the present petition. 12. as already pointed out, the letter dated july 7, 1989 (exhibit 'a'), did contain a clause thereof under which the partners of the firm had authorised shri narain s. kimatrai to represent the karta of n. s. kimatrai (hindu undivided family), one of the partners, to attend the required branch of bank of india and to record oral assent on behalf of the partners and the firms to the bank, to hold the title deeds, the particulars of which were set out in the letter, to record oral assent for creation of equitable mortgage of the building in question and future as security for the due repayment. if the bank records, as tendered before this court along with the affidavit-in-reply, show that the said assent was in respect of all the dues of the partners an various accounts referred to therein and, if as per the oral assent, the bank record indicated the portion quoted above for due repayment of several accounts, the equitable mortgage in question was to be considered as security, it was certainly open to the bank to prove in an appropriate action founded on the basis of the mortgage that they were entitled to tack as against the security of the equitable mortgage all the amounts due from the firm/s or the partner/s of the mortgagors, to the bank. in any event, such a question is a disputed question of fact and it is not possible for us in a writ petition like this, which is not an action founded on the mortgage for the redemption of the mortgage, to decide this question in one way or the other. indeed, the return of title deeds deposited under an equitable mortgage is a relief that is generally granted in a decree passed in a suit for redemption of the mortgage. when intricate questions of fact and law are required to be considered while adjudicating upon the rights of the parties under a transaction of mortgage, it is certainly not in the interest of justice to adjudicate upon those rights in a proceeding like this. 13. mr. cooper, then, relied upon the decisions of the supreme court in gujarat state financial corporation v. lotus hotels pvt. ltd., : air1983sc848 and kumari shrilekha vidyarthi v. state of u. p. : air1991sc537 , in support of the proposition that a writ petition would be maintainable if a public authority, who could be covered by the definition of the expression 'the state' for the purposes of the exercise of constitutional jurisdiction under articles 226 and/or 227, were to act arbitrarily in the matter of taking a decision even in connection with contractual matters. true it is, that a mortgage transaction is a matter of contract; but when the litigation relating to it requires determination of the real terms and conditions of the contract or the enforcement of the special rights of the mortgagor or of the mortgagee, which could be exercised by filing a suit for redemption or foreclosure, according to law, for the appropriate reliefs, it would certainly not be permissible to the court exercising the aforesaid constitutional jurisdiction to exercise the jurisdiction which ordinarily vested in a court that was to decide the suit of mortgage. we are afraid that if a wider connotation, as was sought to be placed by mr. cooper, was placed on the ratio of the aforesaid two supreme court decisions, most of the actions against the nationalised banks, which could be founded on the basis of mortgages where the rights of the parties are intricate and founded on technicalities of law relating to mortgages, would become redundant. we are sure, that such is not the meaning of the ratio that was laid down by the supreme court in the aforesaid two cases. 14. in result, we hold that the writ petition for the reliefs sought in the matter, would not be sustainable. accordingly, we dismiss the same summarily.