Padmavathamma and ors. Vs. Battepati Parthasarathi (Plaintiff) and ors. - Court Judgment

Excerpt:
- - the suit is therefore filed for the relief of mortgage decree for the suit amount against the defendants 1 to 4 as well as the d-5 who died during the pendency of the suit. 3. the contesting defendants mainly the 5th defendant who had purchased the mortgaged properties from the official receiver contested the suit contending that the alleged pronote as well as the mortgage said to have been effected in favour of the plaintiff by the first defendant are not true and the plaintiff is not entitled to recover any amount on the basis of such alleged transactions and that the memorandum of mortgage by deposit of title deeds said to have been executed by the first defendant in favour of the plaintiff is (sic) in law for want of registration and cannot be used for any purpose and the suit is also not maintainable without obtaining the leave of the insolvency court as the mortgaged properties were already sold by the official receiver in public auction to the 5th defendant. subordinate judge, decreed the suit by passing a preliminary decree for mortgage having come to the conclusion that the pronote as well as the mortgage created by the first defendant in favour of the plaintiff by executing ex. a-1 pronote as well as ex. a-7 is not a genuine document all these circumstances clearly indicate that ex. 1, which is discussed in detail by the lower court, clearly reveals that the first defendant borrowed the amount and executed ex. the learned subordinate judge has also referred to various decisions of our own high court as well as other high courts and the principles laid down in such decisions regarding the admissibility of memorandum by deposit of title deeds in evidence for want of registration and rightly came to the conclusion that inasmuch as ex. a-2 memorandum clearly show that the documents were already deposited and that the memorandum was subsequently executed to evidence such deposit already made. such view was clearly held by the high court of rangoon in maung thardun v. dev prosonna mukerjee, air 1935 calcutta 460. they went to the extent of holding that an unsuccessful creditor of the mortgagor in the insolvency jurisdiction to get cancelled the sale held by official receiver free from encumbrance will not estop the mortgagee from thereafter filing a suit to enforce his mortgage. but a perusal of the said decision clearly shows that the observations made by the learned judges have absolutely no application and are not of any assistance for the contention of the appellant.r. bayapu reddy, j.1. this appeal is tiled by d-12 to d-15 who are the legal representatives of the 5th defendant in o.s. no. 32/70 on the file of the addl. subordinate judge, ananthapur, questioning the decree and judgment dated 19-12-1983 decreeing the suit filed by the plaintiff who is the first respondent herein for recovery of the suit amount on the basis of equitable mortgage.2. the first respondent who is the plaintiff filed the suit originally against d-l to d-6 for recovery of the suit amount on the basis of equitable mortgage created by the 1st defendant by deposit of title deeds in his favour. defendants 1 to 4 were members of hindu joint family and d-l was the manager of such joint family and they were engaged in doing joint family business. d-l borrowed an amount of rs. 12,000/- from the plaintiff on two occasions and executed ex.a-1 pronote in his favour. on the same day he created equitable mortgage in his favour for the amount borrowed by depositing exs.a-3 to a-6 title deeds with the intention of creating equitable mortgage and on the same day in the evening he executed ex.a-2 memorandum in token of his having created the equitable mortgage. subsequently the defendants 1 to 4 did not discharge the debt. d-l and d-2 were adjudged as insolvents in i.p. no. 2/61 and d-3 was also adjudged as insolvent in i.p.no. 26/62 on 23-03-1963 and their properties were vested in the official receiver who is the sixth defendant in the suit. subsequently it was learnt that the official receiver sold away the mortgaged properties in the administration of the estate of the insolvents, and in the auction held by him on 25-08-1962, d-5 who is the relative of the defendants 1 to 4 was declared as the highest bidder and the sale was knocked down in his favour. such sale effected in favour of the d-5 by the official receiver is subject to the mortgage in favour of the plaintiff as he is a secured creditor. the suit is therefore filed for the relief of mortgage decree for the suit amount against the defendants 1 to 4 as well as the d-5 who died during the pendency of the suit. the other defendants were brought on record as legal representatives.3. the contesting defendants mainly the 5th defendant who had purchased the mortgaged properties from the official receiver contested the suit contending that the alleged pronote as well as the mortgage said to have been effected in favour of the plaintiff by the first defendant are not true and the plaintiff is not entitled to recover any amount on the basis of such alleged transactions and that the memorandum of mortgage by deposit of title deeds said to have been executed by the first defendant in favour of the plaintiff is (sic) in law for want of registration and cannot be used for any purpose and the suit is also not maintainable without obtaining the leave of the insolvency court as the mortgaged properties were already sold by the official receiver in public auction to the 5th defendant. the 5th defendant further contended that he is a bona fide purchaser of the properties in public auction without notice of the earlier mortgage alleged to have been created in favour of the plaintiff and that the suit is therefore liable to be dismissed.4. on the basis of the evidence placed before him, the learned addl. subordinate judge, decreed the suit by passing a preliminary decree for mortgage having come to the conclusion that the pronote as well as the mortgage created by the first defendant in favour of the plaintiff by executing ex. a-2 memorandum is true, that ex. a-2 memorandum of mortgage by deposit of the title deeds is admissible in evidence as it need not be registered, that there is no necessity for obtaining the leave of the insolvency court for filing the suit by the plaintiff who is a secured creditor and that the contention of 5th defendant that he is a bona fide purchaser without notice of any prior mortgage is without substance and has no relevance and that the plaintiff, is therefore, entitled for preliminary decree for mortgage. the defendants 13 to 15 in the suit who are legal representatives of the 5th defendant have chosen to file the present appeal before this court raising the same pleas as in the lower court contending that the lower court has erred in decreeing the suit on the basis of the mortgage by deposit of title-deeds. even though it was contended in the grounds of appeal that the 5th defendant is a bona fide purchaser without notice of the prior mortgage in favour of the plaintiff and that therefore the suit is not maintainable against him, such ground was not urged in the course of the arguments evidently on account of the fact that there is no substance in such plea inasmuch as the question of bona fide nature without notice of the prior mortgage does not arise in cases of this nature. the learned counsel for the appellant has however urged the other pleas which were raised in the lower court and contended that the suit is not maintainable and is liable to be dismissed.5. the points that arise for consideration in the present appeal are: (1) whether the mortgage by deposit of title deeds created in favour of the plaintiff by the first defendant is true and valid and whether ex-a2 memorandum of mortgage of title deeds is inadmissible in evidence for want of registration. (2) whether the suit filed for recovery of the mortgage amount without obtaining the leave of the insolvency court is not maintainable6. point no. 1: the contention of the plaintiff is that d-l who is the manager of the joint family consisting of himself and his brothers who are d-2 to d-4 borrowed an amount of rs. 12,000/-and executed ex.a-1 pronote in his favour on 01-02-1958 and also deposited exs. a-3 to a-6 title deeds with the intention of creating equitable mortgage for the said amount on the same day in the morning, and in the evening on the same day d-l executed ex.a-2 memorandum to evidence the earlier mortgage created in his favour by depositing the title deeds and that subsequently the debt was however not discharged and as such the suit was filed for recovery of the mortgage amount. it was however contended by the defendants 1 to 4 in the suit that such mortgage said to have been created in favour of the plaintiff is not true and not valid and ex.a-2 memorandum which is written on a white paper is not admissible in evidence for want of registration and that the suit based on such documents not maintainable. the plaintiff has let in his own evidence as p.w.l and filed exs.a-1 to a-7 to prove his contention that the mortgage was in fact created by the first defendant having borrowed the amount and that ex.a-2 is a valid document and is admissible in evidence. the learned subordinate judge has discussed the evidence adduced in the suit in detail and rightly came to the conclusion that the first defendant had in fact created the mortgage by depositing the title deeds in favour of the plaintiff having borrowed the amount and that the plaintiff is entitled for preliminary decree for mortgage. p.w.1 has deposed that d-l had executed ex.a-1 pronote on 01-02-1958 for rs. 12,000/- in his favour at madras and that on the same day in the morning he deposited ex. a-3 to a-6 title deeds with the intention of creating equitable mortgage and that on the same evening d-l executed ex.a-2 memorandum evidencing the above said deposit of title deeds already made in his favour. ex.a-1 is not attested by any persons as the plaintiff and the first defendant alone were present when such documents were executed. the first defendant died during the pendency of the trial of the suit and as such, his evidence could not be let in. it is seen from a perusal of the evidence of p.w.1 that it was not even suggested during his cross-examination that the signatures of d-l in ex.a-1 and a-2 are forged. it is also clear from the evidence mat the genuineness of the signatures of d-l in ex.a-1 and a-2 was not disputed by the contesting defendants during the course of the trial. the tenor of the cross-examination of p.w.i also shows that the genuineness of these two documents is not disputed and that it was sought to be contended that ex.a-2 is inadmissible in evidence for want of registration and the suit is not maintainable for want of leave of the insolvency court. the contesting defendants appear to have relied upon ex.b-12 which is a statement recorded by official receiver from the first defendent in his proceedings in i.p, no. 2/61 on 24-11-1962 for the purpose of showing that the first defendant did not create any equitable mortgage in favour of the plaintiff. in the said statement, the first defendant appears to have slated that there was no mortgage by deposit of title deeds said to have been created by him in favour of the plaintiff. ex.b-6 is the certified copy of the letter dated 24-11-1962 written by the plaintiff to the official receiver. the first sentence in that letter discloses that on 13-11-1962, the official receiver issued a notice to the plaintiff requiring him to produce the necessary documents in support of his claim of mortgage. it is clear from such circumstance that the official receiver and other parties to i.p. no. 2/61 were aware of the claim of the plaintiff on the basis of ex.a-1 and a-2 even by 13-11-1962. ex.b-12 statement wa8 recorded subsequent to 13-11-1962 which is the date on which the official receiver issued the notice to the plaintiff. on the date of ex.b-12 itself the first defendant tried to give a convenient explanation to show how the plaintiff was in possession of exs.a-1 and a-2. but such explanation given by him therein is quite contra to the various suggestions put to the plaintiff on behalf of the contesting defendants during his evidence regarding the manner in which and the circumstance under which the plaintiff is said to have obtained ex.a-1 and a-2 from the first defendant. these aspects were discussed in detail by the learned subordinate judge, who rightly came to the conclusion that the first defendant in fact borrowed the amount from the plaintiff and executed ex. a-1 pronote as well as ex. a-2 memorandum to evidence the equitable mortgage by deposit of title deeds already created by him in favour of the plaintiff.7. in addition to the above said circumstances, there are some other circumstances also which are referred to and discussed by the learned subordinate judge in para 19 of his judgment and he rightly came to the conclusion that exs. a-1 and a-2 are true and genuine. the plaintiff filed ex. a-7 which is a letter dated 12-03-1960 jointly written by d-l, d-3 and d-4 admitting that d-l to d-4 are members of the joint family and that d-l is the manager of the joint family. they also acknowledged that d-l received rs. 12,000/- on 01-02-1958 by executing a pronote in favour of the plaintiff and also confirmed the creation of equitable mortgage by depositing original title deeds. d-3 and d-4 who are signatories to ex.a-7 letter, are not even examined as witnesses in the suit even though they are alive. no evidence is let in on behalf of the contesting defendants to show that ex.a-7 does not contain the signatures of d-l, d-3 and d-4 and no suggestion was also put to p.w.1 in cross- examination that ex.a-7 is not a genuine document all these circumstances clearly indicate that ex. a-1 and a-2 are genuine documents and that the first defendant in fact as manager of the joint family consisting of himself and his three other brothers created equitable mortgage by deposit of title deeds and later executed ex. a-2 memorandum to evidence such mortgage already created by him.8. learned counsel for the appellant has further tried to contend, and which is the main contention raised by him regarding the mortgage, that ex. a-2 memorandum is inadmissible in evidence for want of registration and that the suit is not maintainable on the basis of such inadmissible document. but such contention also was rightly rejected by the lower court for the reasons given by it in its judgment the evidence of p.w.1, which is discussed in detail by the lower court, clearly reveals that the first defendant borrowed the amount and executed ex. a-1 pronote in favour of the plaintiff on 0l-02-1958 in the morning at madras and at the same time he deposited exs. a-3 to a-6 title deeds with the plaintiff with the intention of creating equitable mortgage and later on in the evening on the same day executed ex. a-2 memorandum at his house at madras to evidence the mortgage by deposit of title deeds already created by him and there is no reason to disbelieve such version in view of the various circumstances revealed from the evidence adduced before the lower court which is already discussed above. the learned subordinate judge has also referred to various decisions of our own high court as well as other high courts and the principles laid down in such decisions regarding the admissibility of memorandum by deposit of title deeds in evidence for want of registration and rightly came to the conclusion that inasmuch as ex. a-2 is a memorandum subsequently executed to evidence deposit of title deeds already made in favour of the plaintiff, such memorandum need not be registered and is admissible in evidence. in the decision of our high court reported in pentala githavardhana rao v. the andhra bank ltd., : air1973ap245 in which the division bench of this court had observed that a mere memorandum evidencing deposit of title deeds cannot be construed as a contract and as such does not require any registration. in the present case, the very tenor and contents of ex.a-2 memorandum clearly show that the documents were already deposited and that the memorandum was subsequently executed to evidence such deposit already made. the learned subordinate judge has referred to the relevant contents of ex.a-2 which are in vernacular and rightly came to the conclusion that the deposit of title deeds was already made and that ex.a-2 memorandum was subsequently executed only to evidence such prior transaction which was already completed. inasmuch as, equitable mortgage by deposit of title deeds was not created by ex.a-2, it is not required to be registered and as such it cannot be said to be inadmissible in law. therefore, the suit is maintainable on the basis of such memorandum as rightly found by the lower court.9. point; no. 2: the main contention of the learned counsel for the appellants is that the properties of d-l to d-4 including the mortgaged properties were already vested in the official receiver as they were adjudged as insolvents and the mortgaged properties were also sold by him in public auction and they were purchased by the 5th defendant and that in view of such circumstances the suit filed by the plaintiff without obtaining the prior leave of the insolvency court is not maintainable. he tries to contend that unless the insolvency court is moved for setting aside the sale held by the official receiver regarding the mortgaged properties, the present suit filed for recovery of the mortgage amount on the basis of equitable mortgage cannot be sustained. he has titled to rely upon the provisions of section 4, section 28 and section 68 of provincial insolvency act in support of his contention. but such contention of the learned counsel for the appellant is without substance and cannot be accepted. section 28(2) of the insolvency act provides that when an adjudication order is passed by the insolvency court, the whole property of the insolvent shall vest in the court or in the official receiver as provided in the act and such property shall become divisible among the creditors and that thereafter, except as provided by the act, no creditor to whom the insolvent is indebted in respect of any debt, shall, during the pendency of the insolvency proceedings, have no remedy against the property of the insolvent in respect of the debt, or commence any suit or any legal proceedings except with the leave of the court. the learned counsel for the appellant tries to rely upon such provisions of section 28(2) of the act and contend that, inasmuchas, the leave of the insolvency court is not obtained in the present case, the suit filed by the plaintiff, who is a creditor of the insolvent, is not maintain vole for recovery of the suit amount. but it is to be seen that section 28(6) of the act specifically provides that section 28 shall not affect the power of any 'secured creditor' to realise or otherwise deal with his security in the same manner as he would have been entitled to realise or deal with it if the said section had not been passed. it is clear from such provisions of section 28(6) that the rights of the secured creditor are protected and that he need not seek any leave of the insolvency court for realising the secured debt due to him. it is also clear from provisions of section 28(6) and the other provisions of the provincial insolvency act that the general scheme of the act is that the secured creditor stands out-side the insolvency proceedings unless he himself chooses to submit to the jurisdiction of the insolvency court. section 6 of section 28, no doubt does not entitle a secured creditor to ignore the insolvency proceedings altogether or to treat the court or official receiver as non-existent. it only saves the power of the secured creditor to realise his security or to otherwise deal with it and authorise him to do so in the same manner as he would have done, had the section not been passed. the power of a secured creditor is to realise his money by the sale of the mortgaged property, and the manner in which such right can be exercised is, to file a suit, obtain a decree, get it executed and get the properties sold in execution of such decree. while proceeding against the property of the insolvent for the realisation of the mortgage debt, he must implead the court or the official receiver because the equity of reduction(sic. redemption) vests in such court or the official receiver in view of the order of adjudication. in the present case, the official receiver is already made a party to the suit as 6th defendant the secured creditor of the insolvent is entitled notwithstanding section 28(2), to realise the security by filing a suit or otherwise in accordance with law without obtaining the leave of the court. such view was clearly held by the high court of rangoon in maung thardun v. poka, air 1928 rangoon 1928 and also by bombay high court in kashibahi v. bhinna bee, air 1930 bombay 11 and by calcutta high court in naresh kumar singh v. dev prosonna mukerjee, air 1935 calcutta 460. they went to the extent of holding that an unsuccessful creditor of the mortgagor in the insolvency jurisdiction to get cancelled the sale held by official receiver free from encumbrance will not estop the mortgagee from thereafter filing a suit to enforce his mortgage. when such are the rights of a secured creditor to realise the amount due to him and when such rights of a secured creditor are duly protected by the provision of section 28(6) of the provincial insolvency act, it is not open to the counsel for the appellant to come up with the plea that the leave of the insolvency court is necessary for the plaintiff to file the suit on the basis of the mortgage created in his favour. therefore, such contention of the learned counsel for the appellant is without substance and cannot be accepted.10. he has further tried to refer to the provisions of section 4 and section 68 of the provinclal insolvency act and contended that the suit is not maintainable on the basis of the mortgage and that the only course open to the plaintiff is to move the insolvency court for setting aside the sale held by the official receiver. but this contention is also without any substance. section 68 of the act, which deals with the case of appeals to the court against the orders of the receiver, merely provides that if the insolvents or any of the creditors or any other person is aggrieved by any act or decision of the receiver, he may apply to the court, and the court may confirm or modify such act or decision and make such order as it thinks fit section 4 of the act which refers to the power of the insolvency court to decide all questions arising in insolvency court merely provides that subject to the provisions of the act, the court shall have full power to decide all questions whether of title or priority or of any nature whatsoever which may arise in any case of insolvency coming within the cognizance of the court. in view of such provisions of section 4 which refers to the powers of the insolvency court to decide all questions which may arise in any case of insolvency including the question relating to title or priority, the learned counsel for the appellant tries to contend that the plaintiff is bound to approach the insolvency court for deciding the question of validity of the sale held by the official receiver and that he cannot file a suit straightaway for realising his mortgage debt in civil court. but the learned counsel for the appellant, while raising such plea, has forgotten the provisions of section 28(6) of the act which saves the rights of a secured creditor, as already discussed above. section 4(1) of the act starts with the proposition that the said provisions of section 4(1) are subject to other provisions of the act. therefore, where any other section of the act contains a provision which either was counter to section 4(1) or expressly excludes the application of that section, the said section would, to that extent, become in-applicable. therefore, in view of specific provisions of section 28(6) which protects the rights of a secured creditor, it is not necessary for the plaintiff to approach the insolvency court seeking any relief for setting aside the sale held by the official receiver, before he makes any attempt to realise his mortgage debt by approaching the civil court. therefore, there is no substance in the contention of the learned counsel for the appellant. he has also tried to rely upon the decision reported in muthukaruppayee achi v. pothapular pilla, air 1949 madras 834 in support of his contention. but a perusal of the said decision clearly shows that the observations made by the learned judges have absolutely no application and are not of any assistance for the contention of the appellant. therefore the contention of the learned counsel for the appellant is without substance and liable to be rejected. the present suit filed for the recovery of the mortgage debt is therefore maintainable without having the necessity of obtaining any leave from the insolvency court and without approaching such court for seeking the relief of setting aside the sale held by the official receiver. in view of such circumstances, there are no merits in the present appeal and it is liable to be dismissed.11. the appeal is accordingly dismissed, but without costs as the respondents have not chosen to appear and contest the appeal.