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2000 DIGILAW 651 (KER)

George v. Bank of India

2000-12-08

A.LEKSHMIKUTTY, S.SANKARASUBBAN

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Judgment :- S. Sankarasubban, J. This appeal is preferred by the defendants in O.S. No. 225/85 on the file of the Additional Subordinate Judge's Court, Ernakulam. The plaintiff in this case is the Bank of India. The suit was filed for realisation of amounts due from the defendants. The prayer in the suit was to grant and declare that the defendants pay to the plaintiff-bank jointly and severally a sum of Rs. 1,53,654.09 ps. together with future interest on the sum at 17.5 per cent per annum, from the date of the suit till the date of realisation and also to grant an order of attachment of immovable property having an extent of 10 cents in Sy. No. 711/6-7 of Cheranelloor Village belonging to the 2nd defendant which was offered as a collateral security by way of equitable mortgage for repayment of the loan in favour of the plaintiff and also for other consequential reliefs. 2. Many contentions were raised by the defendants in the suit including the question of limitation. The court below found that the suit was not barred by limitation. It also took into consideration the fact that mortgage by deposit of title deeds have been created and so, there is no question of limitation. In the memorandum of appeal, many grounds were raised. But, at the time of argument, learned counsel Sri. Kochunny Nair for the appellant, contended that he is confining his argument with regard to two contentions. The learned counsel fairly admitted that these contentions have not been taken before the lower Court. But, since they are questions of law, they can be urged before this Court. The contention centres round the acceptability of mortgage by deposit of title deeds or equitable mortgage. According to him, on a reading of Ext. A13 there can be no mortgage by deposit of title deeds because at the time when the mortgage was made, the second defendant was not a debtor and only when the title deeds are deposited by the debtor that a mortgage can be created. He contended that second defendant executed only Ext. A12 guarantee. The guarantor becomes liable only when {here is a default committed by the principal debtor and hence, there is no liability when the mortgage was created. The second contention is that, even if Ext. He contended that second defendant executed only Ext. A12 guarantee. The guarantor becomes liable only when {here is a default committed by the principal debtor and hence, there is no liability when the mortgage was created. The second contention is that, even if Ext. A13 actually created a mortgage by deposit of title deeds, since it is not registered, there was no valid mortgage. The learned counsel relied on the decisions of the Honourable Supreme Court reported in Union Bank of India v. Lekharam Sonaram & Co., AIR 1965 SC 1591, K.J. Nathan v. S.V. Mantthi Rao, AIR 1965 SC 430, and Hubert Peyoli v. Santhavilasath Kesavan Sivadasan,1998 (2) KLT 125. 3. Sri, Devan Ramachandran, appearing for the respondent contended that the appellant can not raised this contention at the appellate stage. According to him, the contentions have no basis. He contended that at the time when the mortgage was, created, the second defendant was a debtor in the sense she had executed Ext A 12 guarantee. He contended that for creating a mortgage even a contingent liability is enough. He further contended that Ext. A13 does not create a mortgage by deposit of title deeds. 4. Before we proceed to consider the matter, we will refer to Exts. A12 and A13. Ext. A12 is dated 19.11.1975. That is executed by the 2nd defendant, ft is addressed to the Bank of India. It is stated therein that, "In consideration of your from time to time making, or continuing advances to, or coming under liabilities or discounting bills for, or otherwise giving credit or accommodation or granting time for as long as you think fit to M/s. Spares India (hereinafter called "the Principal"), either alone or jointly with any other person or persons I the undersigned hereby guarantee the due payment, two days after demand in writing of all advances, liabilities, bills and promissory notes, whether made, incurred, or discounted before or after the date hereof, to or for the Principal, either alone or jointly with any other person or persons, and also ail bills, promissory notes, guarantees held by you bearing the principal signature, together with interest, commission, and other Banking charges, including all legal charges and expenses. Provided always that the total amount which 1 shall be liable to pay under this guarantee shall not exceed r &. Provided always that the total amount which 1 shall be liable to pay under this guarantee shall not exceed r &. 59,5q(f-together with interest thereon, or on such less sum as may be due at the rate of 4 percent OBR Mia.13 % or at such other rate of interest which may then be payable by the Principal (including in particular interest at an additional or penal rate, in the event of default by the Principal in punctual payment of any installment and/or of interest) or which may have been noticed to the Principal, from the date of the Principal's default until payment". Thus Ext. A12 is a contract of guarantee executed by the second defendant. Ext. A13 is a copy of oral statement. That is dated 19.11.1975. It is stated in Ext. A13 as follows: "Mrs. Kochu Thresia (Mrs. Baby George) called at the bank today and handed over and deposited with us, acting on behalf of the bank, the title deeds relating to the immovable property belonging to her comprising of land, buildings and other fixtures installed or erected thereon situated in Sy. No. 711/6-7 in Cheranellor Village, KanayannurTaluk.Ernakulam District (Area 10 cents). At the time of such deposit, Mrs. Kochu Thresia stated that she made the deposit of the title deeds and documents with intent to create security in favour of the bank by way of equitable mortgage over the said immovable property (comprising of land and building and other 'structures now or hereafter to be installed or erected thereon) for the due repayment of the loan in the name of Mr. E.P.George (Spares India) to the bank at Ernakulam or at any office of the bank on demand of the said demand loan for Rs. E.P.George (Spares India) to the bank at Ernakulam or at any office of the bank on demand of the said demand loan for Rs. 59,500/- granted to them (Spares India) with interest at the agreed rate of 4% OBR Minimum 13% per annum with quarterly rests or such other rates as may be notified to him by the bank from time to time and or for the due repayment of any advance of any nature now due or pending due or that may be made or become due hereafter from time to time either in respect of or under the said loan account or in any other account or accounts of them and whether singly or jointly with another or others and whether at Ernakulam Branch or any other branch or office of the bank and or for any indebtedness or liability whatsoever of them (i.e. Spares India) to the bank and also for the due observance, performance, and discharge by them or any obligation to the bank which may give right to a pecuniary liability and for all costs (between attorney and client) charges and expenses whatsoever paid or incurred by the bank in connection with the premises for the protection, preservation, enforcement, and realisation of such security and recovery of its dues and so that the security so created shall be and always remain as a continuing security and shall be in addition to any other security for any such indebtedness or liability now held or hereafter to be held by the bank". 5. Sri. Kochunni Nair first of all invited our attention to the decision reported in Union Bank of India v. M/s. Lekharam Sonaram & Co., AIR 1965 SC 1591. There also, the question considered by the Supreme Court was whether the exhibits produced were merely a record of the past transactions or created an equitable mortgage and required registration under S.17 of the Indian Registration Act, 1908. Dealing with the contention in paragraph 7 of the judgment, the Hon'ble Supreme Court observed as follows: "A mortgage by deposit of title deeds is a form of mortgage recognised by S.58(f) of the Transfer of Property Act which provides that it may be effected in certain towns (including Calcutta) where a person 'delivers to a creditor or his agent documents of title to immovable property with intent to create a security thereon'. In other words, 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 under S.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 the lender of documents of title to immovable property within the intention that those documents shall constitute a security which will enable the creditor ultimately to recover the money which he has lent".(emphasis supplied) Learned counsel stressed on the words "debtor", "creditor", "borrower" and "lender", and submitted that in this case, it is the second defendant who created, according to the Bank, a mortgage by deposit of title deeds. But, the second defendant was neither borrower nor creditor. She was only a guarantor. According to her, hence, there was no mortgage. S.58(a) of the Transfer of Property Act defines what is mortgage as under: "A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt or the performance of an engagement which may give rise to a pecuniary liability." In Mulla's Commentary of Transfer of Property Act at Page 361, it is stated that, a mortgage may not only be for a specific sum. but to secure a current account between the parties upto a limit. At page 362 it is stated that, the future debt referred to in the section may be a contingent liability, e.g., a mortgage to secure the payment of the respondent's costs in an appeal (a) or to further secure a mortgage against the loss of his existing security (b). The author refers to the decisions in Girindra v. Bejoy (1898) 26 Cal. 246, Tokhan Singh v. Girwar, (1905) 32 Cal. 494 and Nand Lai v. Dharamdeo, (1925) 781C 457. In this context, it is pertinent to note that the definition refers to an existing or a future debt. The author refers to the decisions in Girindra v. Bejoy (1898) 26 Cal. 246, Tokhan Singh v. Girwar, (1905) 32 Cal. 494 and Nand Lai v. Dharamdeo, (1925) 781C 457. In this context, it is pertinent to note that the definition refers to an existing or a future debt. A contract of guarantee is defined under S.126 of the Indian Contract Act, as under: "A contract of guarantee is a document to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the "surety"; the person in respect of whose default the guarantee 'given is called the "principal debtor", and the person to whom the guarantee is given is called the "creditor". 6. In Union of India v. Raman Iron Foundry, AIR 1974 SC 1265, it has been held that debt includes any liability in respect of any obligation to repay capital sums of annuities and liabilities to any guarantee. 7. It may be true that, the liability of a guarantor exists only in the event of the Principal Debtor committing default. But, nevertheless, that is an obligation created by the document for the guarantor to discharge the debt in case default is committed. It is a debt arising in future. It may not be a debt in praesenti. But the definition takes into account both the debts in praesenti and the debts in future. The definition of debt in Webb v. Stenton, (1883) 11 QBD 518 of Lord Lindley, J. is as follows: " a debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation". There must be debitum in praesenti; solvendum may be in praesenti or in futuro that is immaterial. There must be, an existing obligation to pay a sum of money now or in future. In Kesoram Industries v. Commissioner of Wealth Tax, (1966) 2 SCR 688 = AIR 1966 SC 1370, the Supreme Court observed as follows: "Standing alone, the word'debt' is as applicable to a sum of money which has been promised at a future day as to a sum now due and payable. In Kesoram Industries v. Commissioner of Wealth Tax, (1966) 2 SCR 688 = AIR 1966 SC 1370, the Supreme Court observed as follows: "Standing alone, the word'debt' is as applicable to a sum of money which has been promised at a future day as to a sum now due and payable. If we wish to distinguish between the two, we say of the former that it is a debt owing, and of the latter that it is a debt due." If we read in that context, a guarantor is also a debtor and, hence, entitled to create a mortgage by deposit of title deeds. Hence, we hold that the second defendant was competent to create a mortgage by deposit of title deeds. 8. The next question is whether Ext. A13 requires registration. A reading of Ext. A13 clearly shows that it is only record of an event which has already taken place and Ext. A13 does not create a mortgage. Hence, according to us, it does not require registration. 9. According to us, the decision in Hubert Peyoli v. Santhavilasath Kesavan Sivadasan,1998 (2) KLT 125 does not apply to the facts of the case. In that case, from the statement of facts it is seen that a document was executed on the same day on which the deposit was made and hence, a learned Single Judge of this Court held that the document requires registration, because according to him, it was simultaneous. But, here, no document is executed. Ext. A13 is only a recording of a statement. Hence, the above decision does not apply to the facts of the case. In the above view of the matter, the appeal is dismissed. No costs.