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Chitoory Venkataraju Vs. M. Venkatarajamma and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAndhra Pradesh High Court
Decided On
Case NumberLetters Patent Appeal No. 160 of 1959
Judge
Reported inAIR1963AP189
ActsCode of Civil Procedure (CPC) , 1908 - Order 34, Rule 11
AppellantChitoory Venkataraju
RespondentM. Venkatarajamma and ors.
Appellant AdvocateCh. Sankara Sastry and ;T. Veerabhadrayya, Advs.
Respondent AdvocateD. Narasaraju, Adv. General, ;R. Venkata Subbarao and ;K. raghava Rao, Advs.
DispositionAppeal allowed
Excerpt:
.....to pay interest and schedule property to stand as security - court held there was no pre-existing mortgage in terms of decree - respondents cannot be allowed to apply order 34 rule 11 at stage of execution of decree - no relief granted under section 3 of usurious loans act, 1918 - appeal allowed. - - ' (. ) 'that in case the defendants do not so pay the decretal amount in six months, plaintiff, without the need for a final decree, do execute this decree and recover (it) with costs of execution by sale of the schedule charged property, from the 1st defendant personally and from all the properties of the defendants 1 to 6'.the judgment-debtor failed to pay any amount as content plated within six months of passing of the decree. it was also averred that the court had regard to the..........otherwise, it was contended that the provisions for payment of interest subsequent to the date fixed for redemption should be treated as being penal in nature and that the court should exercise its power and jurisdiction and grant relief against the penal provision for interest. according to the petitioner, the decree being a mortgage decree, the fixation of subsequent interest was not in the domain of contract but was a matter in the discretion of the court and, as such, the court should relieve the parties from the liability to pay compound interest after the date fixed. it was finally stated that in no case the decree-holder was entitled to more than 6% per annum simple after the date fixed for redemption, at least in regard to the interest and costs. on these allegations he.....
Judgment:

Ramachandra Rao, J.

1. This is a Letters Patent Appeal against the judgment of our learned brother Sanjivarow Nayudu, J. under Clause. 15 of the Letters Patent in A. A. O. No. 179 of 1956. The facts leading upto the appeal are shortly as fallows :

2. The appellant in this Letters Patent appeal is the holder of two promissory notes in his favour dated 7-12-33 and 8-2-34 for Rs. 2700/- and 2000/- respectively from the first judgment-debtor Mutha Saryarayudu. The interest was stipulated at Rs. 1-4-6% p. m. compound with quarterly rests and Rs. 1-6-6% p. m. compound with quarterly rests, respectively. On 25-7-39, the first judgment-debtor for himself and as guardian of his minor sons executed an agreement (Ex. A-2) in favour of the appellant, whereunder he undertook to create a mortgage over certain properties for the amount due under the two promissory notes. On 27-542, the' appellant filed the suit O. S. No. 37 of 1942 on the file of the Sub Court, Kakinada for the recovery of a sum of Rs. 15,188-8-0 against the first judgment-debtor and his sons with a prayer that the amount be made recoverable by the sale of the property agreed to be mortgaged under the agreement dated 25-7-1939. A decree for specific performance of the agreement was also prayed for in the alternative, and then for a decree for sale.

This suit was compromised between the parties and a compromise decree was passed on 30-3-1944, the Court having accorded its sanction on behalf of the minor sons of the first judgment-debtor (the compromise having been certified by the counsel for the defendants). Under the compromise, the amount payable by the first judgment-debtor and his sons by that date was fixed at Rs. 11,599-9-0 made up of (a) Rs. 4000/- being the principal amount borrowed under the promissory notes, (b) Rs. 6071-12-0 being the interest thereon, calculated at 0-12-6% per month annual compound and (c) Rs. 1527-13-0 being the public costs Incurred by the appellant. The clause in the compromise decree Which has given rise to the controversy is as follows:

'that the sum of Rs. 11,599-9-0, together with Interest from this day till realization at Rs. 0-12-6% p. m., compound with yearly rests, be paid by the defendants to the plaintiff within six months from this date;' (..... )'

'that for the said amount the plaint schedule --properly do stand security;' (. . . . .) 'that in case the defendants do not so pay the decretal amount in six months, plaintiff, without the need for a final decree, do execute this decree and recover (it) with costs of execution by sale of the schedule charged property, from the 1st defendant personally and from all the properties of the defendants 1 to 6'.

The judgment-debtor failed to pay any amount as content plated within six months of passing of the decree. The appellant, therefore, filed E. P. No. 64/47 on the 10th February 1947, claiming interest at the rate provided for in the decree. That E. P., was dismissed on 31-347 for non-payment of baatta for fresh notice under Order 21, Rule 22 C. P. C. The appellant filed the next E. P. No. 71 of 1950, claiming a similar relief on 20-2-50. In that E. P. the first judgment-debtor (i.e., father) was served with a notice under Order 21, Rule 22 C. P. C. but he did not appear nor file any counter. That E. P. was eventually dismissed on 20-7-1950 for non-payment of batta for fresh notice ordered to the guardian of the minor judgment-debtors. Before the dismissal of this E. P. the first judgment-debtor made a part payment of Rs. 400A on 25-6-1950.

3. The appellant then filed E. P. No. 332 of 1953 on 20-7-1953 ciliming interest at the rate stipulated in the compromise decree. A counter was tiled thereto on 24-9-53 raising the only plea that they were to get credit for a sum of Rs. 2,000/- paid to the decree-holder's brother on 26-9-1952 in part satisfaction of the decree and praying for six months' time to pay up the balance. The decree-holder admitted the payment of Rs. 2000/- and part satisfaction was accordingly entered on 6-10-53, and-the E. P. was posted for the checking of sale papers to 8-10-53. Thereafter sale notices were taken to the judgment-debtors and eventually the charged property was ordered to be sold on 10-3-54. On that day, the appelant-decree-holder filed another application to permit him to bid and set off and that was allowed with the consent of the judgment-debtors.

The judgment-debtors paid Rs. 1000/- to-the decree-holder and got the sale adjourned to 144-1954. On that date they made a further payment of Rs. 4500/- and got the sale adjourned to 28-7-54. Again on 28-7-54 a further sum of Rs. 1000/- was paid to the decree-holder and the sale was got adjourned to 8-9-54 on which date they paid a further sum of Rs. 500/- and sot the sale adjourned to 3-11-54. Again on that date the judgment-debtors paid Rs. 1000/- to the decree-holder and had the sale adjourned to 8-12-54. In between these two dates, the first judgment-debtor filed an application E. A. 141? of 1954 for determining the amount due under the decree-to Rs. 12,143-5-0, and the same having been fully paid; full satisfaction should be entered, or that the amount due should be determined and if there is any excess payment to be made, pass such other orders as the Court deemed fit in the circumstances of the case.

4. It must be stated that the first judgment-debtor when he obtained adjournment of the sale on 28-7-54 stated in his application E. A. 762 of 1954 that by that date a sum of Rs. 20,0007- more was still due and that he wanted to secure that amount or adjust the matter with the decree-holder.

5. The allegations in E. A. 1412 of J954 out of which this appeal arises are shortly as follows.

6. The first judgment-debtor and his sons became-divided as early as 1941. According to him, the understanding was that as the minors' interests were Involved, time was given for a period of six months, so that the decree-holder may execute the decree immediately thereafter as the Rajinama did not provide for further Interest thereafter. According to the Interpretation put by the-first Judgment-debtor the stipulation to pay 0 -12-6% per mensem annual compound was only till the end of the period fixed, namely six months, and that the parties never contemplated the payment of Interest at that rate after that period at all. A plea was also raised on behalf of the minors that the Court in passing the compromise decree did not apply its mind from the point of view of the minors as to whether the compromise decree was reasonable or beneficial. It was also submitted in the alternative that the payment of interest on the Interest and costs portion at any rate was illegal and opposed to the statutory provisions of 0. 34, Rules 4, 5, 11 of the Cods of Civil Procedure.

Even otherwise, it was contended that the provisions for payment of interest subsequent to the date fixed for redemption should be treated as being penal in nature and that the Court should exercise its power and jurisdiction and grant relief against the penal provision for interest. According to the petitioner, the decree being a mortgage decree, the fixation of subsequent interest was not in the domain of contract but was a matter in the discretion of the Court and, as such, the Court should relieve the parties from the liability to pay compound interest after the date fixed. It was finally stated that In no case the decree-holder was entitled to more than 6% per annum simple after the date fixed for redemption, at least in regard to the interest and costs. On these allegations he filed the above application under the provisions of 0rder 21, Rule 2 C. P. C. for entering of full satisfaction or for determining the amount payable applying the provisions of Order 34, Rules 4, 5 and 11 C. P. C. and fixing the post diem interest at 6% in any event.

7. This application was resisted by the appellant decree-holder. It was stated that on a proper interpretation of the terms of the compromise interest was payable at 0-12-6% p.m., till the date of payment and not merely till the date fixed for redemption. It was also averred that the Court had regard to the reasonable and beneficial nature of the compromise and gave Its permission and, as such, the decree was a perfectly valid and enforceable one. It was denied that the provisions of Order 34 were applicable and that they did not in any event prohibit the grant of Interest subsequent to the date fixed for redemption at the rate agreed upon by the parties. There was no penalty to be relieved against. A plea was also raised that the petition was barred by the principle of 'constructive res judicata' In that the petitioner did not raise any of these pleas in spite of receipt of notices under Order 21, Rule 22 C. P. C. It was further stated that the Judgment-debtors should be estopped by their conduct and previous representations and admissions from raising any of the contentions raised in the petition.

8. The respondents 2 to 5 in E. P. 1412 of 1954 are the sons of the first judgment-debtor. They filed another counter to the effect that they were minors who were divided from their father at the date of the decree, that the Rajinama was forced against them at the Instance of the first Judgment-debtor, their father, and was the result of the gross neglect of their guardian, and that It was based on false representations made to the Court that It was for their benefit. They further stated that they were contemplating appropriate proceedings to set aside the decree. They adopted the contentions of the petitioner without prejudice to their rights to agitate in separate proceedings, and prayed that full satisfaction may be entered as pleaded by the first Judgment-debtor.

9. The Subordinate Judge, Kakinada, held that on a . proper construction of the decree, interest was payable on the agreed sum even after the date fixed viz. 30-944.He also held that the provisions of 0rder 34, C. P. C. werenot applicable to the case on hand, as It was not a suit,to enforce a mortgage or a charge, and that in any eventthe clause providing for the payment of Interest at Re.0-12-6% p.m., annual compound was not penal. He accordingly dismissed the application filed by the 1st judgrment-debtor.

10. On appeal, to this Court, our learned brother Sanjiva Row Nayudu, J. held that on a correct interpretation of the decree it did not provide for payment of interest after the date fixed for payment.

11. The learned Judge reached the same conclusion-'by an examination of the question from another angle', as he calls it. According to the learned Judge;

'In a simple money suit on promissory notes to which the minors were not parties, a mortgage decree was passed, against the properties allotted to the minors in the partition between them and their father. The minors were not parties to the agreement, Ex. A-2, which could not have been specifically enforced against them.

The usual provision under the C. P. C. for the passing of a final decree in the wake of a preliminary-decree was dispensed with. On the expiry of six months,, an immediate right was given to the decree-holder not: only to proceed against the subject-matter of immoveables, secured under Ex. A-2, but the decree was declared executable even against the other properties of the minors as well on the theory of pious obligations.

The possible benefit which the minors would have secured had a decree on the merits of the case been-made under the provisions of Order 34, Rule 11 C. p. C. was-. denied by the minors.'

12. According to the learned Judge: all the conditions were extremely onerous to the minors and advantageous to the decree-holder. The learned Judge says as follows:

'It is surprising how such a decree could have been recommended by the counsel for the minors as beneficial to them and how such a decree could have been certified' by the Court as being for the benefit of the minors..' The learned Judge also doubted whether the minors could at all be made liable on the theory of 'pious obligation'. The learned Judge says that but for the trend of decisions, he would not have hesitated to hold that the right of a creditor Based purely on a contract against the father could not be enforced against the sons by reason of the fact that the consideration as such could not be enforcer! against the minor sons. He also held that no decree for specific performance could at all be passed against the interest of the minors on a contract executed by their father, as it was lacking In mutuality. According to the learned Judge ; 'The Court had abdicated Its function as a trustee of the minor defendants before it In placing its seal of-approval on the compromise decree, which was extremely harsh, damaging and prejudicial to the interests of the minors.'

The learned Judge remarked that great injustice was perpetrated on the minors in sanctioning the term providing for interest at 0.12-6% p.m., annual compound even after the date fixed for redemption until such time the decree-holder may choose to consider It convenient to enforce the decree, he having twelve years within which to do so. The learned Judge held:

'Any act of a court of law in laying Its seal of approval on such a transaction would be wholly without jurisdiction and cannot have any effect in law and should be ignored as illegal, even by an executing Court to which application is made for the execution of such a decree.'

The learned Judge therefore, thought that the Court could grant relief to the judgment-debtors by going behind the decree. The learned Judge accordingly held that no interest was payable en the amount fixed under the compromise decree after the date fixed for redemption, both as a matter of construction of the decree and also on the ground that the passing of such a decree was wholly illegal. It is against this Judgment of the learned Judge that the above L P. A. is filed.

13. Before us, the learned Advocate General did not support the reasoning of the learned Judge regarding the sons' liability to discharge their father's debt. Even on the construction of the decree it was very faintly argued that the decree did not provide for interest subsequent to the date fixed for redemption.-

14. We have no hesitation in agreeing with the learned Subordinate Judge that on a proper construction of the terms of the compromise decree it did provide for interest subsequent to the date of redemption. It definitely says that the interest is payable until payment. The words in Telugu which were used are as follows,....... (from this date till payment)

15. The translation of this part of the decree given by the learned Subordinate Judge in para (2) of his judgment is correct. The words 'till realisation' do not mean 'till the period of six months'. The giving of time only means that the decree could not be put in execution for a period of six months. It does not however mean that after that period no interest is payable, and such a construction is opposed to the plain language. Moreover the fining of annual compound interest with quarterly rests clearly contemplates the payment of interest when after one year. We have, therefore, no hesitation in accepting the construction put by the learned Subordinate Judge on the clause relating to the payment of interest in reversal of the finding of the learned Judge.

16. The next point seriously argued by the learned Advocate General is that the suit was one lo enforce the mortgage inasmuch as it was a decree for sale that was prayed for and, therefore, the provisions of 0. 34, C. P. C. are attracted. According to the learned Advocate General under 0rder 34, Rule 11 subsequent interest after the date fixed for redemption and upto realization of actual amount due should be at such rate as the Court deems reasonable. Having regard to the provisions of Clause [h) of 0rder 34 Rule 11 C. P. C. it is contended that the Court should relieve his clients of the liability to pay interest at the rate of 0-12-6% p.m., annual compound as, the rate is not a reasonable one. He also contends that there is no Justification for awarding interest at the same rate on the costs. To attract the provisions of 0. 34, it must be established that there was a pre-existing mortgage in force, at the date of suit. As already stated, the liability for the suit amount arose under two promissory notes coupled with a subsequent agreement to mortgage certain properties as security for the loans.

Relying on the observations in a case reported in Narayana Kutti Goundan v. Pechiammal, 1LR 36 Mad 426 at 434 it is contended that in suits for enforcement of specific performance of agreements to mortgage, Courts 1iave sometimes passed not only decrees for specific performance, but for sale also. As such, it is contended that the suit should be deemed to be one under the provisions of Order 34. The observations at page 434 are as follows :

'No, doubt a person having an agreement may sue for the specific performance of the agreement to execute or assign a mortgage, and in suits for the execution of a mortgage-deed, the Courts have sometimes passed not only a decree for specific performance but for sale also following on the execution of the conveyance. But, this does not justify the view that the agreement itself can be treated as creating a charge'.

The argument is that at or about the time when the suit was filed, the law was understood to be that in a suit to enforce specific performance of an agreement of mortgage, the Court could straightaway pass a decree for sale and not only a decree for specific performance. But, it should be remembered that in this case no mortgage was actually executed in pursuance of the decree of Court. Moreover, these observations came up for consideration before a division Bench of the Madras High Court in Satyanarayanamurt! v. Venkata Pichaiah, AIR 1946 Mad 56. It was there held that in a suit for specific performance of an agreement to execute a mortgage of immoveable property to secure the money advanced by the creditor along with the prayer for the mortgage decree, it is not proper to pass a mortgage decree, though s decree for specific performance could be passed. 'Their Lordships specifically observed after quoting the observations in ILR 36 Mad 426 at p. 434 as follows 'The learned Judge did not mention any suits in which such a decree had been passed and from the subsequent remarks he was apparently referring to American Law. The observations are admittedly obiter and they are not binding on us'.

17. In our opinion, the contention that at the time when the compromise decree was passed the settled law was that a decree for sale could be passed straightaway in a suit for recovery of money in respect of which an agreement lo execute a mortgage had been entered Into, without a mortgage itself having come into existence, has no substance. Moreover, the decree passed in the suit does not appear !o us to be a mortgage decree at al!. It merely provided for the payment of money and a charge was created on the date of the decree over the property in respect of which the agreement of mortgage was executed. Realizing that such a decree cannot be valid, the decree was got registered which, in our opinion, would have been unnecessary if the suit itself was lo enforce a mortgage or a charge. The fact that the compromise decree provided that there was no necessity for passing of a final decree, is in our opinion a clear indication that the decree should not be regarded as one governed by the provisions of 0rder 34, C. p. C. If, therefore, the decree could not be governed by the provisions of 0rder 34, C. P. C. we fail to see how the party r-could invoke the provisions of 0rder 34, Rule 11 C. P. C. Assuming the provisions of 0rder 34 apply to the instant case, Sub-rule (b) of Rule 11 of 0rder 34, does not prohibit the parties from agreeing to a reasonable rate of interest subsequent to the dale fixed for redemption,

18. The further question that arises in this case Is whether the judgment-debtor can be permitted to in voke the provisions of Order 34, Rule 11 (b) C. P. C. at the stage of the execution of the decree. It is a well-known principle of law that no executing Court could in behind the decree itself. No case has been cited to us there during the course of execution of a final decree on tile foot of mortgage, relief was given in respect to subsquent interest from the date fixed for redemption on the ground that such a rate is unreasonable. The learned counsel for the appellant cited to us Subbayya v. J. Padaayva, AIR 1937 Mad 234 and argued that a Court can give relief to the judgment-debtor in executing a compromise decree, against a penalty. In cut opinion, the cases where the executing Court gave relief against penalty stand entirely on a different footing and bear no analogy.

It was also suggested by the learned counsel that the subsequent interest fixed is usurious and relief hould be given to the judgment-debtors. It has to be noted that no relief under the Usurious Loans Act, Act IV of 1913 can be granted because of the provisions of Section 3 proviso (2) which says that in the exercise of powers given wider the Act, the Court shall not do any thing which affects any decree of a Court. Moreover, the question whether a certain rate is usurious or not is I matter depending upon the facts and circumstances of the particular case. This point ought to have been raised in the trial Court and evidence led as to the proper rate of interest We do not see any substance in this contention.

19. On behalf of the decree-holder the learned counsel had cited to us the decision in Krishnan v. Kandan Velu, AIR 3955 Trav-Co. 233 by way of analogy. It was there held that a decree for future mesne profits could be granted by way of compromise for more than three rears and that the provisions of 0rder 20, Rule 12 C. P. C. did not prohibit the Court from passing such a decree. It was held that

'the mere fact that under Order 20, Rule 12 the Court has no power to pass a decree for mesne profits for any period beyond the expiration of three years from the data of the decree will not render an agreement by the defendant to pay mesne profits for the period beyond three years Illegal and void'.

On the same analogy, it was argued that the decree passed by consent providing for interest at a certain rate after the data fixed for redemption both on the costs awarded as also on the amount determined in accordance with Order 34, Rule 11 (a) C. P. C. is not illegal at any rate, it cannot be said that the decree of the Court is void on the face of it, so that the execution Court should stop all execution en its cleanlier being drawn to the fact. What is reasonable rate of interest is purely a question of fact depending upon several circum-stances and it cannot be straightway lied without investigating whether a decree providing for certain rate of interest subsequent to the date fixer] for redemption Is void and illegal on the very free of it. We cannot, there-fore, agree with the learned Judge that the relief should be given in execution to the judgment-debtors under the previsions of Order 34, Rule 11 C.. P. C. in respect of Interest subsequent to the dale fixed for payment by going behind the decree.

20. It has been contended by Shri Ch. Sankara Sastry, the learned counsel for the appellant decree-holder that the petition filed by the Judgment-debtors to enter full satisfaction of the decree is barred by principles of 'constructive res Judicata' inasmuch as the first judgment-debtors as well as the other minor judgment-debtors and their guardian were duly served with notices under Order 21 Rule 22 C. P. C. to show cause why execution should not to proceeded with, and that in answer thereto they tailed to raise the pleas now put forward. There was actuallyan order for sale and thereafter time was obtainad a number of times for making payments towards 'he decree.The learned counsel contends that the failure to raise thesepleas at the relevant point of time should operate as *bar to the maintainability of the present execution petition.

21. We feel that there is much force in this contention. But, the learned Advocate General cited to us decision in Ulaganatha Mudaliar v. Alagappa Mudaliar AIR 1929 Mad 903 and Shanmugavelu Filial V. Kamppanna-swami Piliai, : AIR1954Mad1070 wherein it was lent thai the mere fact that a judgment-debtor did not In previous execution proceedings object that the amount for which the execution is taken out is excessive, does not operate as a bar to his raising the plea in the subsequent execution proceedings.

22. It is, however unnecessary for us to go into the question whether this proposition would be applicable to the facts of this case. It may be stated that though this point was not pressed in the trial Court, the point was argued before our learned brother Sanjiva Row Nayadu, though the learned Judge did not deal with the point

23. As we are holding in favour of the appellant on the other points raised, it is unnecessary for us to pronounce a final opinion in this regard.

24. The result, therefore, is that the LettersPatent appeal is allowed, the judgment of the learnedJudge is set aside and that of the Subordinate Judge res-tored with costs here and before the learned Judge.


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