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Siddanna Bovi and ors. Vs. Hanumantha Reddy - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKarnataka High Court
Decided On
Case NumberSecond Appeal No. 587 of 1967
Judge
Reported inAIR1972Kant23; AIR1972Mys23; (1971)2MysLJ62
ActsTransfer of Property Act, 1882 - Sections 58; Specific Relief Act, 1877 - Sections 39; Specific Relief (Amendment) Act, 1963; Indian Contract Act; Code of Civil Procedure (CPC), 1908
AppellantSiddanna Bovi and ors.
RespondentHanumantha Reddy
Appellant AdvocateS.V. Raghavachar, Adv.
Respondent AdvocateB.G. Sridharan, Adv.
DispositionAppeal allowed
Excerpt:
.....of interest takes place- there is no provision in the transfer of property act which makes a mortgage deed invalid or void on there being failure of consideration. no instructions for supply having been received by the mortgagor to supply the goods agreed to be purchased by the mortgagee in terms of that deed, the company instituted a suit against the state of travancore and cochin for a decree for a certain sum by way of damages for failure to advance the loan of rs. in the appeal before the high court the liability of the state to compensate the company for failure to take delivery of the goods offered to be delivered alone was challenged. it was argued that the document haying become void on account of the failure on the part of the state to advance the sum of rs. ' the above..........in the specific relief act of 1963, it is open to a person against whom a written instrument is void or voidable, and who has reasonable apprehension that such instrument, if left outstanding may cause him serious injury, may sue to have it adjudged void or voidable; and the court may in its discretion so adjudge it and order it to be delivered up and cancelled. it is also true that a contract which is not supported by consideration is void and ordinarily it should be permissible for a person who is a party to a transaction to get the same adjudged as void if in the view of the court the said transaction is not supported by consideration. but in the case of a mortgage which has been executed in accordance with the provisions of section 58 of the transfer of property act, a distinction.....
Judgment:

1. The defendants in the suit out of which this appeal arises are the appellants herein.

2. Even though in the plaint the relief prayed for is mentioned in a very Involved way, the case of the plaintiff in effect was that a registered usufructuary mortgage deed executed on 26-8-1955 by him in favour of the defendants was void on the ground that it was not supported by consideration and for possession of six items of the suit properties the possession of which had been handed over to the defendants under the aforesaid deed. The plaintiff pleaded that even though the above document had been executed by him, the defendants had not paid any amount, and therefore, the defendants were not entitled to remain any longer in possession of the properties which were given as security for the mortgage. According to the plaintiff the document being a void one, the defendants had no right to remain in possession of the suit properties and enjoy them. The plaintiff, therefore, brought the suit for a declaration as already stated that the mortgage deed was void and for possession of the suit properties. The defendants contended, inter alia, that the document was supported by consideration and in, any view of the matter, the suit in the present form brought by the plaintiff for a declaration that the document was void, was not maintainable. After trial the learned Munsiff who tried the suit, decreed the suit as prayed for. The appeal of the defendants filed against the judgment and decree passed by the learned Munsiff before the lower appellate court, was unsuccessful. Aggrieved by the judgment and decree of the lower appellate court, the defendants have come up with this present appeal.

3. It is unnecessary to go into the question whether the document is supported by consideration or not if the submission made by Sri S. V. Narasimhan, the learned counsel for the appellants, is well founded. Sri Narasimhan contends that the suit for a declaration that the usufructuary mortgage deed under which possession of the mortgaged properties have passed on to the mortgagee is void on the ground that it is not supported by consideration, is not maintainable. It is the contention of the appellants that the courts below have omitted to notice the distinction between an ordinary contract and a mortgage deed executed by a mortgagor in favour of the mortgagee in deciding the question. The lower appellate court has held that the suit for a declaration that the document is void in the circumstances of the case is maintainable relying upon a decision of the High Court of Madras in Kumarappan Chettiar v. Narayanan Chettiar. (AIR 1917 Mad 492). In that case, the plaintiff who was a mortgagee under a hypothecation bond sued for sale of the mortgaged property. Defendant-1 who was the son and legal representative of the mortgagor, contended that the document was not supported by consideration and, therefore, the suit was liable to be dismissed. The questions that arose for decision before that High Court were (i) whether it was open to any of the contesting defendants to raise the Question of consideration; and (ii) whether, when the execution of the mortgage instrument was proved and it contained a recital that consideration passed, the onus of proving want of consideration did not lie on the persons who wished to attack its validity.

After going through the material which was available in that case the learned Judges of the High Court of Madras held that the suit was liable to be dismissed as under the document no consideration had passed. Justice Spencer one of the learned Judges who decided the case observed in that case that mortgage without consideration was a nullity and so inoperative and that it created no charge on the property as against a subsequent purchaser. The other learned Judge, Kumaraswami Sastri, J. who heard the case observed that in cases of sales and assignments, mere non-payment of purchase money would not vitiate the transaction and in such cases, it was no concern of a person who was no party to the transaction to call in question the non-payment of consideration; where the transfer itself was impeached on the ground of its being a colourable transaction or of its being otherwise invalid in law, different considerations would prevail. He further held that mortgage was prima facie security for a debt, and, where the debt did not exist, it was difficult to see how the security could be enforced; where, therefore, a puisne encumbrance or a person in possession of mortgaged property and claiming title thereto, succeeded in showing that there was no debt, it was difficult to see how the property could be ordered to be sold.

When this decision of the High Court of Madras was relied upon before the same High Court in Abdul Hashim Sahib v. Kader Batcha Sahib. (AIR 1919 Mad 781), the facts of which were almost similar to the case on hand the High Court of Madras distinguished the earlier case from the case before them and held that a plaintiff could not sue for a declaration that a mortgage executed by him in favour of the defendant was not supported by consideration and for cancellation of the instrument on that ground. It may be mentioned here that Kumaraswami Sastri, J. was a member of the Bench which decided the case of Kumarappan Chettiar. AIR 1917 Mad. 492 as well as the Bench which decided the case of Abdul Hashim Sahib. AIR 1919 Mad. 781. The facts in Abdul Hashim Sahib's case. AIR 1919 Mad. 781 were as already stated, similar to the facts of the case On hand; The plaintiff in that suit had executed a usufructuary mortgage deed in favour of defendant-1 and that defen-dant-1 had leased out one of the items to another defendant. The plaintiff's suit was for a declaration that the mortgage deed 'was not supported by consideration and was void and for possession of the property. The court no doubt found that the document was not supported by consideration, but it held that in the circumstances of the case the plaintiff's suit was not maintainable. Dealing with the decision in Kumarappan Chettiar's case, AIR 1917 Mad 492 it was observed by the High Court of Madras as foJlows:-

'In AIR 1917 Mad 492 also the plaintiff was mortgagee without possession and sued to enforce the mortgage for which no consideration had been paid. In those two cases, Spencer, J. held that the mortgage was a nullity and was inoperative- I think the present case can be distinguished from those cases on the ground that possession has been given under the mortgage even if it can be held that a mortgage is void when it has merely been executed without consideration and nothing further has taken place.'

It is therefore clear that the lower appellate court was not correct in relying upon the decision in Kumarappan Chettiar's case, AIR 1917 Mad 492 in deciding the case.

4. It is no doubt true that under the provisions of Section 39 of the Specific Relief Act, 1877 or under the corresponding provision in the Specific Relief Act of 1963, it is open to a person against whom a written instrument is void or voidable, and who has reasonable apprehension that such instrument, if left outstanding may cause him serious injury, may sue to have it adjudged void or voidable; and the court may in its discretion so adjudge it and order it to be delivered up and cancelled. It is also true that a contract which is not supported by consideration is void and ordinarily it should be permissible for a person who is a party to a transaction to get the same adjudged as void if in the view of the court the said transaction is not supported by consideration. But in the case of a mortgage which has been executed in accordance with the provisions of section 58 of the Transfer of Property Act, a distinction has been made by Courts in India.

One important element which is found in the case of mortgage deed and which is lacking in the case of an ordinary agreement is that a mortgage is a completed conveyance. Under Section 58 of the Transfer of Property Act on the execution of mortgage in accordance with its provisions a transfer of interest in the immoveable properties offered as security takes place in favour of the mortgagee. A reading of the definition of the expression mortgage under Section 58 of the Transfer of Property Act would show that the validity of mortgage deed is not dependent upon passing of consideration. As soon as the deed is executed a transfer of interest takes place- There is no provision in the Transfer of Property Act which makes a mortgage deed invalid or void on there being failure of consideration. It may be that when a suit is filed by the mortgagee on the basis of the mortgage deed no decree may be passed in favour of the mortgagee for payment of any money at all for the reason that no consideration has been paid under the mortgage deed. But that does not mean that the mortgage deed itself would have to be deemed as a void one. In one of the earliest cases decided in India by the High Court of Bombay namely Tatia v. Pahaii M898) ILR 22 Bom 176. Farran. Chief Justice observed as follows:--

'I am not, however, as at present advised, prepared to assent to the train of thought which puts conveyance of lands in the mofussil perfected by possession and registration, where the consideration expressed in the conveyance to have been paid has not been paid in fact, in the same category as contracts void for want of consideration. The radical distinction between a perfected conveyance and a contract does not seem to me to have been sufficiently borne in mind thoughout the judgment.'

The above view has been followed in a number of cases by other Indian High Courts. In Raghunath Bhagat v. Amir Bakhsh, AIR 1922 Pat 299(2) it was observed as follows:--

'The argument that the mortgage does not become effective until the money is actually paid loses sight of the fact that mortgage is a conveyance and not a contract. The distinction was pointed out by Farran, C. J. in (1898) ILR 22 Bom 176.'

The view expressed by Farran Chief Justice in (1898) ILR 22 Bom 176 has been approved by the Supreme Court in State of Kerala v. Cochin Chemical Refineries Ltd. (AIR 1963 SC 1361). The facts of that case were these: The Cochin Chemical Refineries Ltd., had executed an 'indenture of mortgage' on October 9. 1950 in favour of the State of Travancore-Cochin under which the mortgagee was bound to pay a certain sum of money by way of advance on the security of the properties mortgaged and also to buy from the company 3000 tons of groundnut cake at a stipulated price from the mortgagor.. The amount agreed to be paid by the mortgagee was not advanced at the date of the indenture and was never advanced thereafter. The Company however arranged for the supply of groundnut cake agreed to be sold under the terms of the mortgage deed and wrote from time to time letters to the appropriate officers of the State asking them to give instructions about the places where the supplies had to be made. No instructions for supply having been received by the mortgagor to supply the goods agreed to be purchased by the mortgagee in terms of that deed, the Company instituted a suit against the State of Travancore and Cochin for a decree for a certain sum by way of damages for failure to advance the loan of Rs. 2,50,000/-and another sum by way of damages for breach of contract to purchase the goods which the State had agreed to buy under the terms of the deed. The said suit was decreed by the trial Court.

In the appeal before the High Court the liability of the State to compensate the company for failure to take delivery of the goods offered to be delivered alone was challenged. The High Court confirmed the decree passed by the trial Court negativing the contention raised on behalf of the State that the obligation to take delivery of the goods agreed to be purchased was contingent on the Government's advancing the loan. The State preferred the appeal against that decree before the Supreme Court. Two questions arose for consideration before the Supreme Court in the above case namely (1) whether under the terms of the indenture the State by refusing to advance the loan of Rs. 2,50,000/- was absolved from the obligation to purchase the goods referred to in paragraph 1(a) of the indenture; and (2) whether in the circumstances of the case, the Company was not entitled to claim damages for breach to purchase the goods agreed to be purchased. It was contended on behalf of the State that so long as the loan was not advanced by the State, the mortgage was not in law effective, and Company could not enforce any of the obligations relating to the goods agreed to be purchased by the State under that mortgage deed one of which was the undertaking given by the State to buy a certain calamity of groundnut cake from the company. It was argued that the document haying become void on account of the failure on the part of the State to advance the sum of Rs. 2,50,000/-, no part of that document was enforceable against the State. Relating the above contention this is what his Lordship Shah. J. (as he then was) observed:

'A transaction of mortgage formally executed does not become void or ineffective merely because the mortgagee fails to advance the amount of money undertaken to be advanced by him. If without advancing the amount agreed to be advanced, he sues on the title created under the deed of mortgage the Court will not award him a decree for anything more than what he has advanced. But that is not to say that the mortgage is invalid. In (1808) ILR 22 Bom 176, Farran. C. J., observed:

'I am not, however ..... prepared to assent to the train of thought which puts conveyance of lands in the mofussil perfected by possession or registration where the consideration expressed in the conveyance to have been paid has not in fact been paid in the same category as contracts void for want of consideration.' Similar observations were made in Rashik Lal v. Ram Narain, (1912) ILR 34 All 273 where Karamat Hussain J. observed at page 276:

'......mortgage under the Transfer of Property Act is a transfer of an interest in the land mortgaged, and not a mere contract. It therefore follows that no sooner a valid mortgage deed is registered, an interest in the property mortgaged, in the absence of anv contract to the contrary, vests in the mortgagees notwithstanding the fact that the mortgage money has not been paid by the mortgagee to the mortgagor. The mere nonpayment of the mortgage money cannot have the effect of rendering the mortgage invalid.' Sulaiman J. in Dip Narain Singh v. Nageshar Prasad. : AIR1930All1 observed that once a document transferring immovable property has been registered the transaction passes out of the domain of a mere contract and into one of a conveyance. Such a completed transaction is governed by the provisions of the Transfer of Property Act and so much of the Contract Act as is applicable thereto.

6. The argument that because the amount was not advanced by the State to the Company, the mortgage was void or ineffective therefore cannot be accepted.'

The above observations are no doubt made by the Supreme Court in a case where the mortgagor contended that the document was void on account of the mortgagee's failure to advance the consideration and therefore no sort of liability arose by the breach of any of the obligations in respect of sale of certain goods referred to in the mortgage deed. That however does not make any distinction. What has been stated by the Supreme Court in approval of the observations of Farran, C. J. should be now taken as well settled. In view of the above the mortgage in this case being a completed transaction, the plaintiff cannot file a suit for declaration that the same is void on the ground that it is not supported by consideration. This however does not Prevent the mortgagor, when a suit is filed against him by the mortgagee for the recovery of the amount under the deed, to plead that no amount is due to the mortgagee. Similarly it is also open to the mortgagor to file a suit for redemption of the mortgage with the plea that no amount having been advanced by the mortgagee, no amount would be payable to the mortgagee and request the court to make a decree as provided in the Code of Civil Procedure directing the redemption of the mortgage without any obligation on the part of the mortgagor, to pay any money at all under the decree to the mortgagee.

5. In the view I have taken, it is unnecessary to go into the question whether the document is supported by consideration or not. It is no doubt true that the courts below have come to the conclusion that the document is not supported by consideration. That finding is set aside and the Question is left open to be agitated by the parties whenever occasion arises.

6. In the result, the judgment and decree passed by the courts below are set aside and the suit filed by the plaintiff is dismissed.

7. In the circumstances of the case, parties will bear their own costs in all the three courts.


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