Cross Objection No.57 of 2005 Life Insurance Corporation of India, represented by its Manager, Legal & HPF Department, Divisional Office-I, 102, Anna Salai, Chennai-600 002. ... Cross Objector
-Vs-
1. P.Seshayya
2. P.Ethiraj
3. P.Ramgopal No.3, (Old NO.139), Sivananda Road, Gill Nagar II Extension, Chennai-600 094. ... Respondents Prayer in A.S.No.507/2005:- Appeal against the Judgment and decree dated 30.9.2004 made in O.S.No.791 of 2001 on the file of IV Additional Judge, City Civil Court , Chennai.
Prayer in Cross Objection No.57 of 2005:- Cross objection against the Judgment and Decree dated 30.9.2004 made in O.S.No.791/2001 on the file of IV Additional Judge, City Civil Court, Chennai.
2. The respondent filed the suit seeking for judgment and Decree directing the defendants to pay a sum of Rs.7,89,220/- towards principal with interest at 18.5% per annum till the date of repayment, failing which, to direct the suit property being mortgaged to be brought for sale for realisation of the amount due by the defendants and if the sale proceeds are insufficient, to pass a personal Decree against the defendants and for costs of the suit.
Briefly the case of the plaintiff is that the defendants applied for a loan of Rs.5,00,000/- for purchasing a property and the plaintiff granted a loan of Rs.4,00,000/ subject to terms and conditions contained thereon and the said offer dated 12.1.1994 was duly accepted by the defendants on 17.1.1994 and the defendants received a sum of Rs.4,00,000/- by cheque dated 21.2.1994 and acknowledged the same by receipt dated 22.2.1994 and for security for repayment of the sum of Rs.4,00,000/- the defendants deposited the title deeds of their property described in the schedule with intent to create equitable mortgage. It is further stated in the plaint that the amount due by the defendants as on 31.1.2001 was Rs.7,89,220/- as principal, as per terms of the loan and the defendants committed default in repaying the loan and the plaintiff demanded payment by sending lawyer's notice dated 10.1.2000 and the demand was not complied with and hence the suit.
4. The defendants, in their written statement, have stated that the Manager is incompetent to represent the plaintiff Corporation since there is no averment in the plaint to show the competence or Authority and no document was filed and hence the suit is not maintainable. It is further stated by the defendants that the claim made by the plaintiff on equitable mortgage is not correct and not sustainable factually and legally. The defendants have further stated that on the averments in the plaint it is clear that no valid, enforceable mortgage has been created and the memorandum of Deposit of title deeds requires stamp and registration to create any security over the schedule property. As the loan and handing over the documents are simultaneous and in praesenti and the same cannot in the eye of law be treated as document to create any security over the schedule property and it is denied that an equitable mortgage has been created and the claim has to be treated as ordinary money claim. It is further stated by the defendants that the claim for interest on compoundable basis and periodical rests is usurious and not sustainable and there is no rate of interest and no details have been given as to how it was arrived at and the suit claim is barred by limitation. The defendants also laid a counterclaim stating that the plaintiff is not entitled to retain the documents as no equitable mortgage is created and they are bound to return the same to the defendants.
5. The plaintiff filed reply/written statement for the counterclaim stating that the averments do not serve any ground for counterclaim and without seeking for declaration that there was no mortgage debt the counterclaim is unsustainable. According to the plaintiff, the Memorandum of deposit of title deeds dated 21.2.1994 was merely evidencing the deposit of title deeds and under law, valid mortgage is created by the act of the defendants and not by any deed or document executed. It is further stated by the plaintiff that handing over of documents and the loan were not simultaneous and the documents were deposited in respect of the money payable under the contract of loan concluded on 12.1.1994 and there is no explanation offered as to how the documents relating to schedule mentioned property came into possession of the plaintiff. The plaintiff has further stated that the defendants never denied the claim of the plaintiff and as equitable mortgagee the plaintiff is entitled to retain the documents of suit property until the claim of the plaintiff is settled.
6. The defendants filed additional written statement stating that the date of deposit of title deeds is mentioned as 21.2.1994 and if the date of loan is taken as 21.2.1994 then both the transactions or events are simultaneous and no valid equitable mortgage has been created and the claim cannot be entertained for want of stamp duty and registration.
7. The Trial Court framed five issues and PW.1 Uma Shankari was examined and Exs.A1 to A23 were marked on the side of the plaintiff and the second defendant was examined as DW.1 and Ex.B1 was marked on the side of defendants. On a consideration of oral and documentary evidence, the trial Court held that the plaintiff has proved the suit claim for recovery of the sum of Rs.7,89,220/- from the defendants and granted mortgage preliminary Decree to the said sum together with interest at the rate of 6% per annum from the date of plaint till date of realisation with costs. Challenging the same, the defendants have preferred the Appeal. Aggrieved over the refusal to grant contractual interest at 18.5% per annum, the plaintiff has preferred the Cross-Objection. Both are heard together. For the sake of convenience, in this Judgment, the parties are referred to as arrayed in the suit.
8. The points for determination in the appeal as well as in the Cross Objection are -
(1) Whether the suit, filed by the Manager, Legal Department of the plaintiff Corporation, is incompetent and not maintainable.
(2) Whether no valid and equitable mortgage has been created to the schedule property in favour of the plaintiff Corporation.
(3) Whether the plaintiff Corporation is entitled to the suit claim.
(4) Whether the plaintiff Corporation is entitled to the contractual rate of interest on the suit claim.
POINT Nos.1 to 3 :
9. It is not in dispute that the plaintiff Corporation granted a loan of Rs.4,00,000/- to the defendants and the defendants executed the documents. Ex.A1 is the loan application dated 21.4.1993 submitted by the defendants. Ex.A2 is the Form dated 12.1.1994 containing Offer and Acceptance. Ex.A3 is the Receipt dated 22.2.1994 given by the defendants for having received a sum of Rs.4,00,000/-. Ex.A4 is the Memorandum of deposit of title deeds executed on 21.2.1994. Ex.A22 is the Mortgage Loan Ledger dated 21.2.1994. Exs.A8 and A9 are the Sale Deed and the Deed of Release respectively, which were deposited with the plaintiff Corporation. Ex.A5 to A7 are the Encumbrance Certificates. Exs.A11 to A14 and A16 to A21 are the Communications sent by the plaintiff Corporation to the defendants. Ex.A15 is the Reply dated 15.2.1997, sent by the defendants to the plaintiff Corporation. Ex.B1 is the Common counter affidavit filed in the Interlocutory Application in I.A.No.14894/02 and xerox copy of the the Power of Attorney.
10. The first contention of the learned counsel appearing for the appellants/defendants is that the suit as framed and filed by the Manager of the plaintiff Corporation, Legal and HPF Department, Divisional Office-I, is not maintainable since the said Manager is incompetent to represent the plaintiff Corporation and no document has been filed along with the plaint to show the competency or authority to represent the Corporation and hence, the suit is not maintainable. Per contra, the learned counsel appearing for the respondent/plaintiff Corporation submits that the plaintiff Corporation ratified the action of the Manager in signing the pleadings and it is available on record as Ex.B1 and it can be regarded as sufficient compliance with the provisions of O.6, R.14 CPC and in support of his submission, he relies on the decision of the Supreme Court in UNITED BANK OF INDIA V.. NARESH KUMAR AND OTHERS [AIR 1997 SC 3].
11. The Manager, Legal and HPF Department, Divisional Office-I, of the plaintiff Corporation situated at 102, Anna Salai, Chennai 2, has signed the pleadings. It is true that no document has been filed along with the plaint to show the competency or the authority of the said Manager to represent the plaintiff Corporation. The said Manager Ms. Uma Shankari has been examined by the plaintiff Corporation as P.W.1 and she has been cross-examined. During trial, xerox copy of the proceedings containing delegation of powers under Regulation 41 of the Life Insurance Corporation Regulations, 1959, framed under
Section 49 of the Life Insurance Corporation Act, 1956, was given to the defendants. In that proceedings dated 12.6.2002, the Zonal Manager, South Zone, has delegated to 42 officers individually the power to institute all suits by representing the Corporation and Sl.No.9 is Uma Shankari M, who has signed the pleadings in the present case. In the above proceedings, the Zonal Manager has also ratified all the acts done by the Officers mentioned therein hitherto. By virtue of the above, the plaintiff Corporation has ratified the action of Uma Shankari, M. in signing the pleadings in the present case. Their Lordships of the Supreme Court in the decision, referred to above, have laid down that where suits are instituted on behalf of a public corporation, public interest should not be permitted to be defeated on a mere technicality and procedural defects, which do not go to the root of the matter, should not be permitted to defeat a just cause and where pleadings have been signed by one of its Officers, a Corporation can ratify the said action of its officer in signing the pleadings. The ratio in the above decision applies to the facts of the present case and the plaintiff Corporation has duly ratified the act of its Officer Uma Shankari, M. in signing the pleadings and hence, the contention of the learned counsel appearing for the appellants is devoid of merit.
12. The next contention of the learned counsel appearing for the appellants is that Ex.A4 Memorandum of deposit of title deeds requires stamp duty and registration to create any security over the plaint schedule property as the loan and handing-over the documents are simultaneous and in praesenti and both the transactions took place on 21.2.1994 itself and in the absence of the requirements, no valid equitable mortgage has been created. Per contra, the learned counsel for the respondent submits that the Acceptance to the Offer was made on 12.1.1994 and on that day itself a concluded contract has come into being and money was advanced on 21.2.1994 and thereafter, the deposit of title deeds was made by the defendants with a view to create an equitable mortgage and the recitals in the Memorandum of deposit of title deeds show the same and in support of his submission, he relies on the judgment of the Supreme Court in DEB DUTT SEAL V.. RAMAN LAL PHUMRA AND OTHERS [AIR 1970 SC 659].
13. It is true that the suit loan was disbursed on 21.2.1994 and on the same day, Ex.A4 Memorandum of Deposit of Title deeds was executed by the defendants. The recitals in Ex.A4 Memorandum are extracted below for better appreciation:
"MEMORANDUM OF DEPOSIT OF TITLE DEEDS We, 1. P.Seshayya son of late Subbarayudu, aged 60 years 2. P.Ethiraj son of P.Seshayya aged 32 years and 3. P.Ramagopal son of P.Seshayya aged 28 years all residing at No.139, Gill Nagar II Extension, Choolaimedu, Madras 600 094, attended the Zonal Office of the Life Insurance Corporation of India, a Corporation established under the Life Insurance Corporation Act 1956 at L.I.C. Buildings Anna Salai, Madras 2 on the 21st February 1994 and have DELIVERED TO AND DEPOSITED with the said Life Insurance Corporation of India at the said Office, the Title Deeds enumerated in Schedule I hereof in respect of my property at Plot No.139, Gill Nagar Extension II, Puliyur-Kodambakkam, Madras, morefully described in Schedule II hereof with intents to create a security thereon for a loan of Rs.4,00,000/- (Rupees four lakhs) only advanced/agreed to be advanced to me by the said Life Insurance Corporation of India.
1. Sd/-
2. Sd/-
3. Sd/-
SIGNATURE OF THE BORROWER."
In the facts of DEB DUTT SEAL's case, referred to supra, money was advanced and the Memorandum of deposit of title deeds was executed on the same day and the contention raised by the defendants was that the Memorandum required registration was inadmissible in evidence. The majority view of the Supreme Court in the said decision was that the words "DELIVERED TO AND DEPOSITED" occurring in the recitals of the Memorandum show that the transaction had already been concluded and the document does not require registration because it is not an operative instrument and what is registrable under the Indian Registration Act is a document and not a transaction. In the present case also the words "delivered to and deposited" occur in the recitals of Ex.A4 Memorandum and in the light of the ratio laid down in the above decision, Ex.A4 Memorandum does not require registration because it is not an operative instrument. Hence, the contention of the learned counsel appearing for the appellants cannot be accepted. The conclusion of the trial Court that the plaintiff Corporation has proved the suit claim of Rs.7,89,220/- against the defendants is based on proper appreciation of oral and documentary evidence and it does not call for any interference by this Court. The points are answered accordingly.
POINT No.4:
14. The plaintiff Corporation has sought for interest at the rate of 18.5% per annum on the suit claim from the date of plaint till realisation on the ground that it is contractual. The trial Court has granted interest only at the rate of 6% per annum. Aggrieved by the same, the plaintiff Corporation has preferred the Cross Objection. The learned counsel appearing for the plaintiff Corporation submits that the suit claim is based on mortgage loan and Order 34 R11 CPC is applicable. Based on the terms contained in Ex.A2, the plaintiff Corporation has arrived at the suit claim till the date of plaint. The Supreme Court in the decision in N.M.VEERAPPA V.. CANARA BANK [AIR 1998 SC 1101] has held that
Section 21A of the Banking Regulation Act does not come to the aid of banks and the Courts discretion should continue with regard to grant of interest for the period during the pendency of mortgage suits in Courts and the discretionary power given to Court under Order 34 Rule 11 CPC is an independent power and the power is neither traceable to Section 74 of the Contract Act nor to any power under other State Statutes permitting a Court to scale down contractual rate of interest and the Apex Court held proper, grant of interest at the rate of 6% per annum in the mortgage suit. In view of the principle of law stated in the above decision, the conclusion of the trial Court awarding interest at 6% per annum from the date of suit, cannot be faulted with in the facts and circumstances of the case. The point is determined accordingly.
15. There are no merits in the appeal and the same is dismissed. However, there shall be no order as to costs in the appeal. The Cross Objection is also dismissed.
vks/pb To
1. The Registrar, City Civil Court, Chennai.
2. The Section Officer, V.R.Section, High Court, Madras