It was contended, was a bone fide purchaser for value without notice of the mortgage. The 1st defendant did not undertake to discharge the mortgage liability. He did not sell any of the items of the machinery mortgaged under Ex. A-9 nor realised any substantial sums thereby and that he is not a trustee nor personally liable. He never gave any personal undertaking to discharge the mortgage debt. Some of the mortgaged properties were subject to the first charge in favour of one Chauhan as stated in the deed itself. As the mortgage deed was not registered under the Companies Act the amount thereunder became immediately payable under the provisions there, and the suit is barred by limitation.
5. Defendants 2 to 7 were impleaded as parties to the suit on 16-2-1962 by an order on I. A. 786/61. They substantialy adopted the contentions of the 1st defendant and also raised the plea of limitation. It was averred that as per the terms of the mortgage deed executed on 5-6-1948 both the principal and interest became due on the failure of payment of one year's interest, and as the first year's interest itself due on 5-6-1949 was not paid the suit should have been filed within 12 years hereafter, i.e., 5-6-1961, but inasmuch as they were impleaded on 16-2-62, the suit as against them was time barred.
6. On these contentions, the learned Subordinate Judge framed appropriate issues and he rejected all the material contentions of the defendants and granted a preliminary mortgage decree directing the defendants to pay on or before 29-3-1963 or any extended date Rupees 70,076-34 with interest at 5-1/2% per annum on 60,000/- from the date of the decree. In default of such payment, he directed that the plaintiffs may apply for a final decree for sale of the mortgage property or sufficient part thereof shall be directed to be sold and the money realised by such sale shall be paid to the 1st plaintiff was also given the liberty to take such further proceedings as are open to him against the 1st defendant, if any part of the plaint schedule property did not exist.
7. Aggrieved by this judgment and decree, this appeal was preferred by the defendants.
8. Sri T. Raman, the learned counsel for the appellants raised before us the following contentions'
(1) The Subordinate Judge's Court, Rajahmundry had no jurisdiction to entertain the suit;
(2) The mortgage deed Ex. A-9 is void and unenforceable under Section 125 of the Companies Act and as such the suit is not maintainable;
(3) Kotha Suryanarayanna, the predecessor-in-title of defendants 2 to 7, was a bona fide purchaser for value without notice, and the properties purchased by him not subject to the mortgage debt;
(4) The suit is barred by limitation.
After hearing Sri Raman and the counsel for the respondents we posted the case for judgment today, giving leave to Mr. Raman to cite any authorities which he wanted. To-day Sri K. B. Krishnamurthy, appears for Mr. Raman raises a few more contentions, viz.,
(i) Ext. A-9 had only created a floating charge but not a fixed charge, and therefore the only remedy of the plaintiffs was to sue for specific performance of the contract Ex. A-9 for the issue of debentures:
(ii) The Several clause in Ex. A-9 provided only of redemption of the debentures and for payment of the interest due thereunder but not for payment of interest or principal under the mortgage deed, and as the mortgage debt became immediately payable and the suit filed beyond 12 years from 5-6-1948 is barred by limitation.
9. We shall now consider the validity of all theses contentions. The first contention of the appellant s is that it is only the District Court, Rajahmundry that had the jurisdiction to entertain the suit, but not the Subordinate Judge's Court. In order to appreciate this contention, it may be relevant to note that the suit was filed as is evident from paragraph 14 of the plaint to enforce the mortgage by sale of the mortgaged properties under Order 34 Rule 1 C. P. C. and for recovery of the suit amount Rs.60,000/- with interest at 5-1/2% per annum and costs by sale of the mortgaged properties or a sufficient part thereof. The suit was filed only against the 1st defendant purchaser of the suit properties, subject to the mortgage debt. By way of abundant caution, defendants 2 to 7 were also impleaded as the 1st defendant contended that he sold the properties in favour Kotha Suryanarayana, their predecessor-in-title. The relevant provisions of the Act, may now be referred to.
10. Section 2 (11) defines 'Court' to mean, with respect to any matter relating to a Company, the Court having jurisdiction under this Act with respect to that matter in relation to that Company, as provided in S. 10. Section 10 lays down that the Court having jurisdiction under this Act shall be - (a) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court under sub-section (2). On a plain reading of these provisions it is clear that the High Court or the District Court, where the jurisdiction had been transferred to it, is the Court having jurisdiction under Act, i.e., to deal with matters provided for by the Act, and it is not correct to say that the Company Court has exclusive jurisdiction in matters falling outside the Companies Act, e.g., suits on contracts or mortgage bonds executed by Companies. As already stated, the present suit is filed for recovery of the mortgage amount by sale of the mortgaged properties under Order 34 Rule 1 C. P. C. and we fail to see how the Subordinate Judge's Court at Rajahmundry which is the Original Court with unlimited jurisdiction cannot entertain the suit. We accordingly reject this contention.
11. The next argument is that the mortgage deed Ex. A-9 is void and unenforceable under S. 125 of the Companies Act. Section 125, omitting unnecessary words, is in the following terms:
'Subject to the provisions of this part, every charge created on or after the 1st day of April, 1914, by a company and being a charge to which this section applies shall, so far as any security on the company's property or undertaking is conferred thereby, be void against the liquidator and any creditor of the company, unless the prescribed particulars of the charge, together with the instrument. if any, by which the charge is created is filed with Registrar for registration in the manner required by this Act within twenty-one days after the date of its creation'.
The Registrar is given the power to register it in seven days thereafter, if he is satisfied that there is sufficient cause for not filing the instrument within the particular period. Sub-section (2) lays down that'
'Nothing in sub-section (1) shall prejudice any contract or obligation for the repayment of the money secured by the charge'.
Sub-section (3) provides that
'When a charge becomes void under this Section, the money secured thereby shall immediately become payable'.
According to sub-section (4), this section applies to the following charges:
(a) a charge for the purpose of securing any issue of debentures;
(b) a charge on uncalled share capital of the company;
(c) a charge on any immovable property, wherever situate, or any interest therein;
(d) a charge on any book debts of the company;
(e) a charge, not being a pledge, on any movable property of the company;
(f) a floating charge on the undertaking or any property of the company including stock-in-trade;
(g) a charge on calls made but not paid;
(h) a charge on a ship or any share in a ship;
(i) a charge on good will, on a patent or a licence under a patent, on a trade mark, or on a copyright or a licence under copyright.
Sub-section (8) provides the holding of debentures entitling the holder to a charge on immovable property shall not, for the purposes of this section, be deemed to be an interest in immovable property. Section 141 provides for rectification of register of charges on the ground of any mistake having crept in, and Section 142, the penalties for non-compliance with these provisions.
12. The distinction between a specific charge and a floating charge is well settled in law and may be stated at the outset. A specific charge is one that without more fastens on ascertained or definite property capable of being ascertained and defined, whereas a floating charge is ambulatory and shifting it its nature, hovering over and, so to speak, floating with the property which it is intended to affect, until some event occurs or some act is done which causes it to settle and fasten on the subject of the charge within its reach and grasp. (Per Lord Macnaghten in Illingworth v. Houldworth 1904 A. C. 355). Debentures may create a fixed or floating charging or both. When the charge is fixed, it affects the title of the property and transfer of interest takes place immediately and the company can only deal with the property affected, subject to the charge. But when the charge is a floating one, the company may, in the ordinary course of business deal with the property covered by the charge mortgaging, selling, disposing of it or using it up as the business requires, at any time before the charge attaches. A liability in floating charge for the recovery of money form the general assets is contingent i.e., on the occurrence of some event a fixed sum of money becomes recoverable from the specific assets which are in existenced at the time. When the contingency arises, the charge is crystallized and then becomes a fixed charge. In other words, a floating charge is an agreement by which the creator of the charge stipulates that in the event of certain contingency an interest in the property, which happens to be in his possession at the time, shall be covered to the holder of that charge.
13. The scope of Section 125 (corresponding) is well settled by authorities. Its non-compliance only makes the security void, not against everybody but as against the liquidator and any creditor of the Company. It leaves the security to stand as against the company while it is going concern but does not make the security binding on the liquidator as successor of the company. In Aung Ban Zeya v. Chettiar Firm. AIR 1927 Rang. 288 the suit was filed for recovery of a sum of money as being due on a mortgage of the company mill and other properties. The mortgagors admitted the debt and the mortgage but pleaded that the mortgagees were not entitled to a mortgage decree because under Section 109 of the Indian Companies Act of 1913, the security on the company's property was void against the liquidator or any creditor of the company, since the prescribed particulars of the mortgage and a copy thereof were not filed with the registrar. That contention was rejected by the trial Court on the ground that there was no question in that case of any claim by a liquidator or any creditor of the company, and gave the respondents a mortgage decree. On appeal the same contention was repeated and a Bench of the Rangoon High Court rejected that contention summarily. An application for leave to the Privy Council was rejected by the Bench of that High Court quoting with approval the observations of the Master of the Rolls and Phillimore L.J. in In Re Monolithic Building Co., Tacon v. The Company, (1915) 1 Ch. 643, which construed Section 93 of the corresponding provisions of the English Companies Consolidation Act of 1908. With regard to a deed which is not registered, the Master of the Rolls observed:
'Of course the deed is not void to all intents and purposes. 'It is a perfectly good deed against the company as long as it is a going concern' '.
Phillimore L. J. observed:
'we have to construe section 93 of the Statute. It makes void a security; not the debt, not the cause of action, but the security and not as against every body,' not as against the company while it is a going concern' '. (Italics (here in ' ' ) ours).
These two cases are authority for the position that the failure to have the mortgage registered under Section 125 of the Act does not in any way invalidate it as against the company when it is a going concern, and its only effect is that the security created by the mortgage is rendered void against the liquidator and the creditor in winding up proceedings. In the instant case, as already noticed even before the Company went into liquidation the mortgaged property was sold in execution of a money decree against the company and the property was purchased by the 1st defendant, subject to the mortgage. We also noticed that the company subsequently, not only went into liquidation but after the conclusion of winding up proceedings its name was struck off the register of Companies.
14. The next case where the facts are similar is a decision of a Bench of the Assam High Court in Bhramar Lal v. Premed Ranjan, AIR 1963 Assam 56. In that case a company executed a mortgage in respect of its properties but it was not registered with the registrar of companies. Pursuant to the mortgage, the mortgagee was also put in possession of the property. The mortgaged property was subsequently brought to sale and purchased by a third party, who contended that the possession of the mortgagee was illegal and was that of a trespasser, because the mortgage not having been registered, it was void. On a review of the case law by Mehrotra, C. J. and C. S. Nayudu J. rejected this contention. The position was summed up by the learned Chief Justice thus:
'To our mind of the plain reading of S. 109 it cannot be said that the failure to register the mortgage renders the mortgage invalid and a nullity. The effect of the section is that if the mortgage is not registered, the liquidator is not to take notice of it as a mortgage. The debt will survive and it will be treated on a par with other debts. The property which is the subject-matter of the security will be available as the assets of the company to the liquidator for payment to the creditors. The creditors in liquidation will not be affected by the mortgage. This section does not take away the right of the company to deal with its property; If the company mortgages certain property, and person who subsequently purchases the property from the company will take it subject to the mortgage and Section 109 is no bar to the mortgagee enforcing his mortgage as against the transferee of the company simply because it has not been registered under Section 109'.
In the present case there is no evidence to show that the company has gone in Liquidation. It is not the liquidator who in the course of the liquidation proceeding is contending that the mortgage is not binding on him. It is the creditor of the company who in execution of his decree has purchased the property and is contending that his purchase is free from the mortgage. Section 109 does not warrant such an interpretation. The question of the liquidator's avoiding it would only arises if the Company has gone into liquidation. So far as the creditor is concerned, the right to avoid would also arise in liquidation. The purpose of Section 109 in calling upon a company to register the charge or mortgage is for the benefit of the liquidator and the creditors in liquidation. 'A creditor who has no interest in the property cannot put any restraint on the powers of the company to mortgage its property'. Neither the language of section 109 nor the purpose behind it can justify such an interpretation. In effect the contention of the plaintiff is that from the date of the auction purchase he became the owner of the property free from encumbrance. The possession of the mortgagee or his lessee became illegal. What he purchased was the property and not only the right of redemption'. (Italics (here in ' ' ) ours.) The learned Chief Justice extracted the observations of Phillimore. L. J. in the case already cited, and followed the decision of the Rangoon High Court in AIR 1927 Rang. 288. The case is an authority for the position that even though the mortgage is not registered under the Companies Act, person claiming to have purchased the mortgaged property in execution of a money decree, cannot contend that his purchase is free from the mortgage, nor is Section 109 a bar to the mortgagee enforcing his mortgage as against the transferee of the company. We follow this decision and hold that in case before us, the mortgaged property having been purchased by the 1st defendant subject to the mortgage, it is not open to him to contend that the mortgage is a nullity, or that the properties purchased by him are not subject to the rights of the mortgagee. In this view, this contention also has to be rejected.
15. One of the contentions raised before us by Mr. K. B. Krishnamurthy is that the remedy of the plaintiffs is only to ask for specific performance of the contract embodied in Ex. A-9 for the issue of debentures within the prescribed period, but not to sue for sale of the mortgage properties. Though this contention was not raised in the lower Court, since it goes to the root of the matter, we shall decide that question also. There is no substance in the contention, as we have held that the right to obtain debentures is not the only right conferred on the plaintiff. In our judgment, Ex. A-9 created both a specific as well as a floating charge, and the right to obtain debentures, and the mere fact that the debentures were not issued, would not take away the rights, otherwise conferred on the mortgagee.
16. We shall now consider the plea of limitation. In doing so, it may be helpful to dispose of this contention in relation to defendants 2 to 7 first. As already stated, their plea was that they were impleaded as defendants on 16-2-1962. According to Ex. A-9 both the principal and interest become due on the date of the default in paying the first year's interest on 5-6-49, and the suit should have been filed against them within 12 years i.e., on or before 5-6-61, and since they have been impleaded on 16-2-62, the suit is barred by limitation. This contention is on the assumption that defendants 2 to 7 were the purchasers of a portion of the mortgage property. The trial Judge found issue No. 3 viz. 'whether the sale to Kotha Suryanarayana by defendant is true' in the negative and held that by the date the suit was filed or even by now the legal title continued to remain in the name of the first defendant, and if the suit was in time against the first defendant, it would also be within time against defendants 2 to 7.
The question incidentally for consideration is, whether there was a valid sale by the 1st defendant in favour of Kotha Suryanarayana. There are a number of circumstances which lead to an irresistible conclusion to the contrary. The first and foremost circumstance is that the property in question consists of land, buildings and also machinery, embedded in earth which constitute immovable property, and any title therein can only be conveyed by means of a registered instrument. Admittedly there was no registered sale-deed. The 1st defendant only stated that there was an agreement entered into between him and Suryanarayana for the sale of the property purchased by him, but an agreement by itself would not convey any title. From the evidence of D. W. 1, Kotha Venkataratnam, son of Suryanarayana, (3rd defendant), it is evident that their family had no property except a small Kirana shop in Pithapuram, which they were running till one year after the death of Suryanarayana. It is unimaginable that Suryanarayana, would in those circumstances have ventured to purchase the suit properties subject to the discharge of the mortgage debt. The evidence of D. W. 1 reveals that he was absolutely ignorant of any details of the property, which would not have been the case, if his father was the purchaser. It is also an admitted fact that the 1st defendant and Suryanarayana married the daughters of sisters. It is therefore, clear that the 1st defendant hit upon the idea of creating, if possible, a sembalance of title in Suryanarayana in order to evade the discharge of the mortgage liability.
For all these reasons, we agree with the learned Subordinate Judge that there was no sale in favour of Kotha Suryanarayana and the device of making Kameswara Rao, take delivery of the property on behalf of Suryanarayana on the ground that he agreed to purchase the properties, was only a vain attempt to evade the mortgage liability. We have no doubt that the legal title as well as possession of the suit property always remained in the 1st defendant, and even if any of the defendants 2 to 7 are in possession of the mortgage property, it is only on behalf of the 1st defendant. It therefore, follows that the plea of limitation has to be considered only from the standpoint of the 1st defendant.
17. In the written statement of the 1st defendant, he pleaded that inasmuch as Ex. A-9 was not registered under Section 125 of the Companies Act, it became void and the money secured became immediately payable. But as already stated the contention of Sri K. B. Krishnamurthi, now is different, viz, that there is no clause in Ex. A-9 creating a fixed charge and all the clauses only provide for a floating charge. His further contention is that none of the clauses contention is that none of the clauses contemplated the payment of interest or the principal advanced under Ex. A-9, apart from the redemption of the debentures. For appreciating this contention, it is necessary to construe the several terms of Ex A-9. Before doing so, it may be as well to state briefly what preceded the execution of Ex A-9. By a resolution dated 2-12-47 (Ex. A-1) the company had first authorised the Managing Agents to raise a loan to the extent of Rs. 50,000/- on the first charge of the assets of the company and then on 12-1-48 (Ex. A-4) there was another resolution whereby it resolved that Rangarao, should advance Rs. 60,000/- as against Rs. 50,000/- previously resolved to be borrowed, and that should carry interest 7 1/2% per annum and that debentures that may be sanctioned at the ensuing General Body meeting be allotted in full to the value of the loan ad that in failure of the issue of such debentures, the Directors shall create a first charge on the assets of the company by a registered mortgage deed.
Thereafter there was an agreement entered into between the company and Rangarao (Ex. (-A) on 19-1-48, by which the company requested him to grant a loan of Rs. 60,000/- for the working capital of the company, and that the Directors would summon a special General Body meting authorising the issue of debentures of that value to be allotted to the creditor or his nominee and that the debentures will carry interest 7 1/2% per annum, and that they will have the first charge on all the assets of the company viz., land, buildings, plant and machinery, manufactured goods, stock in trade, raw materials, debts owing to the company, and bank balances. It also provided that if within one month from that date the necessary resolution authorising the issue of debentures was not forthcoming, the company agreed to give a registered mortgage deed covering all immovable properties of the company to the creditor: Pursuant to that agreement, Rangarao paid Rupees 60,000/- by a cheque dated 19-1-48. Thereafter a special General Body resolution was passed authorising the Directors to borrow not exceeding Rs. 60,000/- at 7 1/2% per annum and to issue debentures of the denomination of Rs. 100/- each. The Board o f Directors passed a resolution on 17-2-48 stating that as no application having been received from any share-holder for debentures in response to the notice dated 7-2-48, the managing Agents were authorised to allot and issue all the debentures of the value of Rs. 60,000/- to Rangarao or his nominees.
18. Pursuant to these resolutions, Ex. A-9 was executed on 5-6-48. This document is styled a debenture deed and executed by the company in favour of Rangarao who was described as the mortgagee. It acknowledges the receipt of the sum of Rs. 60,000/- from the mortgagee and recites that it is executed to secure the repayment of the principal monies and the payment of interest thereon for the time being accured and payable in the manner appearing therein, and that the mortgagee had consented to the terms therein. Ex. A-9 states that 'Debenture Holder' means the said mortgagee Sri Rangarao, his heirs or his legal representatives or administrators for the time being. The important recital is that the company granted and assigned the mortgagee as security for the debentures all and singular the lands premises described in the first schedule annexed to or erected thereon or on some parts thereof and all trees, fences, hedges, ditches, ways, sewers, drains, water-courses, liberties, privileges etc., and to the security of the mortgagee for the purpose therein mentioned and concerning the same. The Company also assigned as security to the mortgagee the machinery, plant, engines, boilers, mill etc., set out in the second schedule which now are or shall from time to time during the continuance of this security be in or upon or about the premises to hold the same premises unto to mortgagee as security.
It also recites that there was a first charge in favour of one H. V. Chauhan, in respect of some of the engines, dynamos, air compressors etc., mentioned in the 3rd schedule and that the mortgagee will have only the rights of a second mortgagee in respect of the same. Clause IX of the deed provides that the principal monies and interest payable in respect of the debentures shall be a first mortgage charge on the premises and plant and machinery and also first charge on the properties detailed under schedules 1 and 2 and shall be a second mortgage charge ranking next to the first charge in respect of the property in the third schedule. The relevant portion in Clause X may be usefully extracted.
'The principal money as well as the interest accured and payable upto date shall immediately become payable upto date shall immediately become payable and the security hereby constituted shall after the expiry of 30 days of grace from such due date become enforceable.
(a) If the company makes default in the payment of interest on the stipulated date in any year;
(b) If the company makes default in the payment of in the payment of the principal amount at the time stipulated therein.
(c) If a distress or execution is levied upon any part of the mortgaged premises or if a Receiver of the Company's undertakings or property or any part thereof is appointed by any Court and such distress or execution is not satisfied or such Receiver is not discharged within fifteen days from the date of the levy or the appointment of the Receiver as the case may be:
(d) If the company commits a breach of any of the present or provisions herein contained and on its part to be observed and performed; xx xx xx xx'.
19. Clause XI then provides, that when and so soon as the principal money secured shall have become immediately payable, the registered holder was entitled to appoint a Receiver of the premises charged and such receiver shall conform to all lawful directions given to him by the mortgagee and the mortgagee may in writing under his hand, remove any Receiver and appoint another, Clause XIV recites that the debentures shall be redeemed in accordance with the contingency mentioned therein, inter alia, that (a) the company will on the 5th day of June, 1954 or on such earlier day as the principal money hereby secured becomes payable in accordance with the conditions therein mentioned, pay the registered debenture-holder hereof for the time being the full and entire sum of Rs. 60,000/-. It also provides that the company will during the continuance of this security pay such registered holder interest on the said principal sum of Rs. 60,000/- or such less amount as is unpaid at the rate of Rs. 7 1/2 per cent per annum subject to deduction of income-tax by annual payments on the 5th day of June in every year.
20. To this document, were attached three schedules as already referred to: The first schedule consists of land, site factory office, buildings etc., the second and third schedules described the machinery. It is needless to point out that the machinery described in schedules 2 and 3 were those in existence on the date of the mortgage, and were embedded in or attached to the earth and therefore, formed part of the factory itself, and immovable property along with the site and buildings, Clause IX of Ex. A-9 already referred to, created a first charge for the repayment of Rs. 60,000/- advanced by the mortgagee on the properties described in schedules 1 and 2 and a second charge on the property described in schedule No. 3. In addition to the said first charge the document also created a charge on the items mentioned in Clauses III to V and a floating charge on the machinery which may be brought in future on the premises, its uncalled capital, its goodwill, and undertaking, the monies now standing or hereafter carried to the reserve fund, depreciation fund etc. There can therefore, be little doubt that in addition to creating a specific charge on the existing immovable properties, Ex. A-9 also created a floating charge. This is also made clear in Clause V which says that the charge created by way of floating charge, is in addition to the specific charge.
21. Sri Krishnamurthi, the learned counsel relying upon some clauses of the deed, dealing with issue of debentures and the other ancillary matters contends that Ex. A-9 only created a floating charge for the debentures intended to be issued and that the debentures could be redeemed only as per the clauses mentioned therein, and that a specific charge was not created by it, though the counsel concedes that a specific charge in addition to a floating charge can also be created.
22. Having referred to the several clauses of Ex. A-9 extracted above, we have no doubt in our mind that a floating charge was created in addition to specific charge on the properties described in the schedules. It follows that the rights which the mortgagee may have in respect of the specific charge would not be destroyed or impaired by reason of additional rights intended to be conferred as the holder of the floating charge. We therefore, agree with the learned Subordinate Judge that this action for the sale of the properties which were specifically charged under Ex. A-9 would lie even though a floating charge was also created under Ex. A-9.
23. The next argument of Sri Krishnamurthi is that granting for the sake of argument that a specific charge was also created, there is no period of redemption provided therefor in Ex. A-9, and the suit for enforcement of the charge, should have filed within 12 years thereof i.e., on or before 5-6-61, is barred by limitation. We are unable to accept this contention, for the following reasons. As already noticed, the mortgagee is the person to whom all the 600 debentures were intended to be allotted, but in fact never allotted. The rights as a debenture holder as well as mortgagee, were all vested only in Rangarao to the company, and a fixed charge, apart from the floating charge, was created as security for the discharge of that mortgage debt.
It is against this background that we have to construe the clauses in Ex. A-9 in this context. Clause X already referred to provides that the principal money as well as the interest accured and payable upto date shall immediately become payable and the security hereby constituted shall after the expiry of 30 says of grace from such due date becomes enforceable, if the company makes default in the payment of interest on the stipulated date in any year. In order to ascertain the stipulated date, reference has to be made to Clause XIV (b) which provides that the company will during the continuance of this security pay such registered holder interest on the said principal sum of Rs. 60,000/- or such less amount as is unpaid at the rate of 7 1/2 per cent per annum on the 5th day of June in every year. According to these two clauses, the first year's interest became payable on 5th June 1949 and admittedly that was not paid. The company had 30 days of grace and hence the right to enforce the security for the realisation of interest and principal accured on 5th July, 1949, and suit could be filed on or before 5th June, 1961.
24. The present suit having been filed on 20-3-61 we having no hesitation in holding that is filed within time. In another view also we must find that the suit is within time. Clause X (c) provides, that 'if a distress or execution is levied upon any part of the mortgaged premises or if a receiver of the company's undertakings of property or any part thereof is appointed by any Court and such distress or execution is not satisfied or such receiver is not discharged within fifteen days from the date of the levy or the appointment of the receiver as the case may be, the principal and interest became payable. In this case admittedly Venkataratnam filed E. P. 87/50 which resulted not only in execution but also a sale on 26-7-51 in favour of the 1st defendant. The Execution Petition was filed some time in 1950 and even assuming that it was filed on 2nd January, 1950 and was ordered the very day, a suit for enforcing the mortgage security could be filed within 12 years thereafter, i.e., on or before 2nd January, 1962.
25. There is yet another reason for holding that the suit is within time. It is no doubt true that the first year's interest sue on 5-6-49 itself was not paid, and the mortgagor could not take advantage of its own default. The mortgage money does not become due within the meaning of Article 132 until both the morgagor's right to redeem and the morgagee's right to enforce his security have accured. As laid down by the Privy Council in Lasa Din v. Mt. Gulab Kunwar, AIR 1932 PC 207, the clauses which empower the mortgagee to enforce security for non-payment of interest of any particular year, would not entitle the mortgagor to rely upon Article 132 and contend that the mortgagor is bound to file the suit within 12 years from the date he committed default ion paying interest. At page 211, Sir George Lowndes speaking on behalf of the Judicial Committee observed thus:-
'There can be no doubt that as pointed out by Lord Blanesburgh a provision of this nature is inserted in mortgage deed 'exclusively for the benefit of the mortgagee' and that it purports to give them an option either to enforce their security at once, or, if the security is ample to stand by their investment for the full term of the mortgagee. If on the default of the mortgagor - in other words, by the breach of his contract - the mortgage money becomes immediately 'due' it is clear that the intention of the parties is defeated and what was agreed to by them as an option in the mortgagees is in effect converted into an option in the mortgagor. For if the latter after the deed has been duly executed and registered finds that he can make a better bargain elsewhere, he has only to break his contract by refusing to pay the interest and 'eo instanti', as Lord Balnesburgh says, he is entitled to redeem. If the principal money is 'due' and the stipulated term has gone out of the contract it follows in their Lordships' opinion that the mortgagor can claim to repay it, as was recognized by Wazir Hasan, J., in his judgment in the Chief Court. Their Lordships think that this is an impossible result. They are not prepared to hold that the mortgagor could in this way take advantage of his own default. They do not think that upon such default he would have the right to redeem and in their opinion the mortgage money does not 'become due' within the meaning of Article 132, Limitation Act, until both the mortgagor's right to redeem and the mortgagor's right to redeem and the mortgagee's right to enforce his security have accured. This would of course, also be the position if the mortgagee exercised the option reserved to him'.
Since we have already held that the registered holder of debentures means the mortgagee, the aforesaid clauses in Ex. A-9 are to be understood as giving an option to the mortgagee to enforce security in default of apparent of the first year's interest, or wait till the period of redemption. i.e., 5-6-54, provided for in the document. A contrary construction is not only warranted by the terms of the deed, but would result in manifest injustice as pointed by the Privy Council. Once it is held that the date for redemption is 5-6-54, the mortgagee could file his suit at any time on or before 5-6-66. In this view also the suit is not barred by limitation against 1st defendant.
26. Sri Krishnamurthi, the learned counsel drew our attention to the several clauses in Ex. A-9 dealing with the rights of the debenture holder and contended, that what all was provided by A-9, was only redemption of the mortgage security on the fixed charge. His argument as already stated was that the only effect of Ex. A-9 was to create debentures with floating charge, and that all the other clauses have to be read as relating to debentures. But as already stated, we are unable to accept that contention especially in view of Clause V 'that the additional securities are created in addition to the specific mortgage premises which means that the premises mentioned in schedules 1 to 3 were specifically mortgaged. For all these reasons, this contention has to be rejected.
27. Before we conclude we must advert to submission of Sri Krishnamurthi, that Clause 5 of the decree of the trial Court is not correctly worded. What all was meant by that clause was that the first plaintiff was at liberty to take such further proceedings as are open to him against the 1st defendant if any part of the plaint schedule property purchased by him was not existing. We are making it clear that there can be no question of any such steps being taken by the plaintiff in respect of the property not purchased by the 1st defendants.
28. In the result all the contentions fail and the appeal is hereby dismissed with costs.
29. Appeal dismissed.