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Amratlal Amarchand Vs. Mulji Savchand - Court Judgment

LegalCrystal Citation
SubjectFamily;Property
CourtMumbai
Decided On
Case NumberO.C.J. Appeal Nos. 1 and 2 of 1944 and O.C.J. Suit Nos. 812 and 918 of 1935
Judge
Reported inAIR1945Bom169; (1944)46BOMLR851
AppellantAmratlal Amarchand
RespondentMulji Savchand
DispositionAppeal dismissed
Excerpt:
mortgage-puisne mortgagees-right of puisne mortgagees to apply for personal decree when assets not sufficient-time when such right arises-limitation-civil procedure code (act v of 1908), order xxxix, rules 4, sub-rule (4), and 6; appendix d, forms nos, 9, 10 and 11-indian limitation act (ix of 1908), article 181.;in a suit filed by the first mortgagee against the mortgagor and subsequent mortgagees, it is the duty of the court under sub-rule (4) in order xxxiv, civil procedure code, 1908, and forms nos. 9, 10 and 11 in appendix d to the code, when passing the preliminary and final decrees, to adjudicate upon the respective rights and liabilities of all the parties to the suit in the manner set forth in the forms. it is not necessary for the puisne mortgagees to file a substantive suit or..........was issued on april 9, 1938. defendants nos. 12 and 13 took out a notice of motion for a personal decree against the mortgagors on june 28, 1943. appeal no. 2 of 1944 is from suit 918 of 1935. that related to the vikhroli property of which the plaintiffs in that suit were the first mortgagees. the firm of messrs. amarchand madhavji & co. were the mortgagors. defendant no. 2 was the second mortgagee while defendants nos. 3 and 4 (who are the same as defendants nos. 12 and 13 in suit 812 of 1935) were the third mortgagees. i have already pointed out that their claim arose out of one mortgage transaction which covered both' the ballard estate property and the vikhroli property. in that suit defendants nos. 3 and 4 filed their written statement on november 9, 1936. the preliminary.....
Judgment:

Harilal Kania, Kt., Acting C.J.

1. This is an appeal from the judgment of Mr. Justice Coyajee. It arises out of mortgage transactions. On May 24, 1935, the Allahabad Bank, Limited, filed Suit No. 812 of 1935 to enforce the first mortgage on the Ballard Estate property executed by defendants Nos. 1 to 8 in their favour. Defendants No. 11 were the second mortgagees. Defendants Nos. 12 and 13 were the third mortgagees of that property, along wifti another property al Vikhroli, which was also their security for the amount advanced by them td the mortgagors. The third mortgage in favour of defendants Nos. 12 and 13 was dated April 10, 1030. The amount became due at the end of two years from the date of the mortgage. Defendants Nos. 12 and 13 filed their written statement on August 27, 1935. In that suit according to Order XXXIV, Rule 4, of the Civil Procedure Code, 1908, a decree was passed in accordance with Form No. 9 of Appendix D on September 10, 1937. It was a consent decree by which the amounts were declared, instead of accounts being taken by the Commissioner. The decree was drawn up on those lines. The property was sold on March 23, 1938, and the Commissioner's certificate was issued on April 9, 1938. Defendants Nos. 12 and 13 took out a notice of motion for a personal decree against the mortgagors on June 28, 1943. Appeal No. 2 of 1944 is from Suit 918 of 1935. That related to the Vikhroli property of which the plaintiffs in that suit were the first mortgagees. The firm of Messrs. Amarchand Madhavji & Co. were the mortgagors. Defendant No. 2 was the second mortgagee while defendants Nos. 3 and 4 (who are the same as defendants Nos. 12 and 13 in Suit 812 of 1935) were the third mortgagees. I have already pointed out that their claim arose out of one mortgage transaction which covered both' the Ballard Estate property and the Vikhroli property. In that suit defendants Nos. 3 and 4 filed their written statement on November 9, 1936. The preliminary mortgage decree was passed on November 18, 1936, in accordance with Form No. 9 of Appendix D to the Civil Procedure Code. The decree absolute was passed on April 13, 1938. The Vikhroli property was sold in January, 1943. Defendants Nos. 3 and 4 took out a notice of motion on July 17, 1943, for a personal decree.

2. The mortgagors are the appellants in both the appeals. Their contention is that the application for a personal decree is time-barred. It is contended that in neither of these two suits the third mortgagees had filed a counterclaim. In their written statement they had not asked for a personal decree. In fact in paragraph 5 of their written statement in suit No. 812 of 14)35 they had reserved their right to take such steps as they might be advised against the mortgagors for the.recovery of such deficiency. In my opinion this point has no substance because at the time of passing the consent decree the parties could, instead of incurring the cost of a formal amendment, have very well proceeded on the footing that the necessary amendment was made and the rights of the parties ascertained on that footing. The Court has not now to proceed on what was contained in the written statement but on what was contained in the preliminary and final decrees under which the rights of the parties have been declared and ascertained. The contention of the appellants is that in the absence of a suit or a counterclaim by the third mortgagees, their right to apply for a personal decree arises only under the consent decree, and as more than five years had expired since then their right was time-barred under Article 181 of the Indian Limitation Act. It was contended, in the alternative, that if the rights of the parties are only under the mortgage, the right of these mortgagees to a personal decree was time-barred because no suit was filed by those mortgagees till 1943, and the liberty to apply lor a personal decree, contained in the final decree, did not give rise to any new right, but left the parties to put forth their claim for a personal decree under their original mortgage. If on the date of the application the right to obtain a decree under the personal covenant was barred, the mortgagees were not entitled to such a decree. In my opinion, these contentions are unsound.

3. The scheme of the Civil Procedure Code has been materially altered by the inclusion of Sub-rule (4) in Order XXXIV, Rule 4. That was done by the Transfer of Property (Amendment) Supplementary Act, 1929. Reading that Sub-rule with Forms Nos. 9, 10 and 11 in Appendix D, it is clear that in a suit filed by the first mortgagee against the mortgagor and the second mortgagee, it is the Court's duty, when passing the preliminary and final decrees, to adjudicate upon the respective rights and liabilities of all the parties to the suit in the manner set forth in the forms. It is not now necessary for the puisne mortgagee to file a substantive suit or counter-claim to get his rights, mentioned in the said forms, ascertained. The present two suits are clearly suits of that description. The form of the decree is on the lines of Form No. 9 in Appendix D. It declares the amounts due by the mortgagors to the first mortgagees, the second mortgagees and the third mortgagees. It specifies the times within which the amounts due to the respective mortgagees have to be paid and it further provides that in default of payment the property should be sold. It also provides the order in which the sale-proceeds have to be applied, and if a deficit arises, liberty is reserved to each of the parties, who does not receive satisfaction of his claim out of the security given to him, to apply for a personal decree for the deficit. Having regard to that, it seems clear that the question of ascertaining the amount personally payable by the mortgagors was deferred till the property was sold and the deficit ascertained. On that being done, the right of the mortgagees, who had not received satisfaction, for a personal decree had to be considered by the Court. If the claim was found valid and not barred, the Court would pass a decree. The contention of the appellants is that the relevant time to be considered for deciding the question of limitation is the date on which the application is made to the Court. In my opinion the wording of Order XXXIV, Rule 4, Sub-rule (4), negatives that argument. In Palaniappa Chettiar v. Narayanan Chettim I.L.R. (1935) Mad. 188 the relief of a personal decree is fully discussed in the judgment of Mr. Justice Varadachariar. He observed as follows (p. 194):-

A mortgagee's suit for sale may comprise two reliefs, one by way of sale of the properties mortgaged and the other by way of a personal decree against the mortgagor for what may remain due after the mortgaged properties have been sold. Though the plaint prays for both the reliefs, the Court is in the first instance expected to deal only with the relief by way of sale. The preliminary decree contains a declaration of the amount due on foot off the mortgage and contains directions as to what is to happen (i) if the defendant pays the amount into Court and (ii) V the payment is not so made; but both the directions relate only to the property mortgaged. The plaintiff's right to the other relief is not tried either at this stage or even at the stage of the final decree ; so that, the final decree under Order XXXIV, Rule 5, Civil Procedure Code, cannot be said to involve any ' adjudication' as to this part of the suit and much less to have 'completely disposed' of it.

4. The application for a personal decree is clearly under Order XXXIV, Rule 6, read along with the form of the final decree, which the Court has passed in the particular case. Those observations show that at the time when the application for a personal decree is made the Court has to consider whether the claim for that relief under the mortgage is barred or not. As I have pointed out, the relevant time for that is the institution of the suit by the plaintiff. In the case of a puisne mortgagee, the latest date may be when he filed his written statement. In the present case whether it is the date of the suit or the written statement is immaterial, because in any view on the later date the claim of, the second mortgagee to enforce the personal covenant) was within time. I have already pointed out that by the preliminary decree and the final decree the Court adjudicated upon the respective rights of the parties in respect of the property. Liberty was reserved to them to apply for a personal decree under Order XXXIV, Rule 6. TMat application is made by a notice of motion under the rules of this Court. On that date, in my opinion, the claim is not time-barred because the relevant date at the latest is the date when defendants Nos. 12 and 13 gled their written statement. Therefore under the contract of mortgage the notice of motion was within time and the contention of the appellants must fail.

5. The contention that under the consent decree the rights of the parties were crystallised and the application for a personal decree under Article 181 of the Indian Limitation Act must be made within three years after the deficit was ascertained, is also unsound. The consent decree contains a narration of the amounts due and does not cut down the mortgagees' rights under the mortgage. The mortgagees' right to enforce the personal covenant, which was in their mortgage, is not taken away by the consent decree. The terms of the consent decree in this suit do not lend support to the argument that the right had lapsed. Under Article 181 of the Indian Limitation Act the time of three years begins to run from the date the right to apply accrues to the applicant. The fact that, after taking credit for what was received under the sale of the Ballard Estate property, the balance payable under the mortgage was ascertained in 1938, gave no right to the mortgagees to apply for a personal decree, because they would be immediately faced with the contention that the other property, namely, the Vikhroli property which was also their security, remained to be sold, and till that was realized it cannot be stated that under the mortgage there was a deficit. In my opinion, therefore, the alternative contention that because of the consent decree defendants Nos. 12 and 13 had to make their application within three years of the Commissioner's certificate dated April 9, 1938, on the sale of the Ballard Estate property also fails. Under Article 181 the time to make the application did not begin to run till the Commissioner issued his certificate in January, 1943, on the sale of .the Vikhroli property. The application is, therefore, not barred under that article.

6. The appeal, therefore, fails and is dismissed with costs.

Chagla, J.

7. I agree. The appellants in this appeal are the mortgagors, and the respondents are the third mortgagees of two properties, one at Ballard Estate and the other at Vikhroli. Suit No. 812 of 1935 from which this appeal arises was filed by the first mortgagees to enforce their mortgage. The first mortgagees' security was only the property at Ballard Estate. To that suit the respondents were made party-defendants as defendants Nos. 12 and 13 being the puisne mortgagees, and the first question that arises in this appeal is whether the respondents' right to enforce the personal covenant under their mortgage is barred. Now' prior to the amendment of Order XXXIV, Rule 4, by the Transfer of Property (Amendment) Supplementary Act, 1929, a puisne mortgagee had two rights in a suit filed by the prior mortgagee : (1) the right to redeem the property mortgaged, and (2) to share in the sale-proceeds if the property was sold. If the subsequent mortgagee wanted to enforce his personal covenant under his own mortgage, he had either to file a separate suit or to counterclaim in the suit filed by the prior mortgagee; but the position of the subsequent mortgagee was materially altered by the amendment of Order XXXIV, Rule 4, to which I have just referred. After the amendment the suit filed by the prior mortgagee was not merely a suit to enforce his own mortgage but it was equally a suit to determine the rights and liabilities of all the parties to the suit. Therefore the nature of the suit filed by the prior mortgagee after the amendment in 1929 was much more comprehensive than it was before the amendment. When after the amendment a: preliminary mortgage decree is passed in accordance with Form No. 9 of Appendix D to the Code, the Court has got to determine whether at the time of the passing of the decree the personal covenant of the subsequent mortgagee as much as that of the prior mortgagee is enforceable. Now if one looks at the Form, it provides that the liberty to apply for a personal decree shall be incorporated in the preliminary decree provided such remedy is open under the terms of the respective mortgages of the prior and subsequent mortgagees and is not barred by any law for the time being in force. Therefore], when one turns to the consent decree in this suit which has followed to all practical effect Form No. 9, one finds that the Court has reserved the liberty to the respondents to apply for a personal decree. In my opinion the proper time to consider whether the right to enforce a personal covenant on the part of the respondents was barred or not was before the consent decree was passed. If that contention had been taken up by the appellants, it would have been the duty of the Court to consider that contention. But that contention was not taken up because at the date of the filing of the suit- and even if one considers the filing of the written statement by the appellants as the material date as suggested by the learned Chief justice, even at that date the claim of the appellants to enforce the personal covenant was within time. The whole of Mr. Amin's submission on this point has been that as the respondents did not file a suit to enforce their covenant and did not even counterclaim in the suit filed by the first mortgagees, their claim on the covenant is barred ; that the period of limitation is six years from the time when the amount becomes payable under the mortgage and that time begins to run from April 10, 1932. In making their application for a personal decree it is true that the respondents have not filed a separate suit nor have they counterclaimed. But their contention is that they are making an application in a suit which has already been filed by the prior mortgagee and in which their right has been determined. Mr. Amin refers to a full bench decision of the Calcutta High Court reported in Pell v. Gregory I.L.R. (1925) Cal. 828. In that case the only question that arose for determination was whether an application under Order XXXIV, Rule 6, fell under art 181 or Article 183 of the Indian Limitation Act; and a full bench of the Calcutta High Court decided that an application for a personal decree under Order XXXIV, Rule 6, is governed by Article 181 of the Indian Limitation Act. At p. 844 Mr. Justice Rankings he then was) says this:-

In each case the question is one of construction of the mortgage instrument and the personal liability to repay may become barred before the right of recourse to the mortgaged property is barred. In these Circumstances a decree for sale made in a mortgage suit, unless it contains an express decision as to personal liability, is not in any way an affirmation that such liability exists, or ever has existed.

8. Now, in my opinion, in the consent decree taken by the parties there was an affirmation that the liability of the appellants under the personal covenant existed and. the consent decree further provided that the -right to apply for that personal decree should arise when the deficiency was ascertained. It may seem that Mr. Justice Varadachariar in Palaniappa Chettim v. Narayanan Chettiar I.L.R. (1935) Mad. 188 takes a different view as to the rights which are determined when the preliminary mortgage decree is passed. The learned Judge has taken the view in the judgment referred to by the learned Chief Justice that the right of the plaintiff to the personal decree is not tried at the stage when the preliminary mortgage decree is passed but is to be determined at the stage when the application for a personal decree is made under the provisions of Order XXXIV, Rule 6 ; even so, if the right to enforce the personal covenant, was to be determined at the time when the application for a personal decree was made by the respondents by the notice of motion, I agree with the learned Chief Justice that as far as the question of limitation is concerned, that question has to be determined with reference to the point of time when the suit to enforce their mortgage was filed by the first mortgagees or at the latest at the date when the respondents filed their written statement in which they put forward their mortgage and asked for a declaration of the amount due to them under that mortgage.

9. The next contention of Mr. Amin is that even if the respondents' right to enforce the personal covenant Tinder their mortgage is not barred, in any case their application for a final decree is barred under Article 181 of the Indian Limitation Act. Now the question to be decided, as far as Article 181 is concerned, is : when did the righ to apply for a decree arise? Mr. Amin contends that that right arose on the terms of the decree itself when the property, namely, the Ballard Estate property, was sold which was on March 23, 1938, and the deficiency was ascertained at the latest when the sale certificate with regard to that property was issued on April 9, 1938. Now it has got to be remembered that the consent decree in Suit No. 812 of 1935 was only dealing with the Ballard Estate property. The plaintiffs in that suit, as I have pointed out, had filed the suit to enforce their mortgage which only related to the Ballard Estate property. Therefore the Vikhroli property was not the subject-matter of that suit at all. The right to apply for a personal decree must be determined according to the terms and provisions of the mortgage deed to which the appellants and the respondents-were parties ; and the right to apply for a personal decree on the part of trie respondents could only arise under the terms of that mortgage not when tne Ballard Estate property was sold and it was found that the respondents' mortgage claim had not been paid off, but when the other property, namely the Vikhroli property, was as well sold and it was found that although both the mortgaged properties had been sold, the sale-proceeds were not sufficient to pay off the mortgage claim of the appellants. It is almost axiomatic that a mortgagee cannot apply for a personal decree against a mortgagor till he has exhausted all the security given to him under the. mortgage. Therefore till both the mortgaged properties had been sold and the position had been ascertained, the right to apply for a personal decree did not arise; and as the Vikhroli property was only sold on January 18, 1943, it was then that the respondents were in a position to say that as the sale-proceeds of the two properties had not been sufficient to pay off the mortgage claim, they became entitled to ask for a personal decree against the mortgagors. Therefore, even under Article 181 of the Indian Limitation Act, in my opinion the application by the respondents was within time.

10. I, therefore, agree that the appeal should be dismissed with costs.


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