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intraven Pharmaceuticals Pvt. Ltd., Hyderabad and ors. Vs. the Andhra Pradesh Small Scale Industries Development Corporation Ltd., Hyderabad - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtAndhra Pradesh High Court
Decided On
Case NumberCity Civil Court Appeal No. 138 of 1976
Judge
Reported inAIR1984AP36
ActsRegistration Act, 1908 - Sections 17
Appellantintraven Pharmaceuticals Pvt. Ltd., Hyderabad and ors.
RespondentThe Andhra Pradesh Small Scale Industries Development Corporation Ltd., Hyderabad
Appellant AdvocateG.S.R. Anjaneyulu, Adv.
Respondent AdvocateG. Suryanarayana Murthy, Adv.
Excerpt:
.....mortgage deed itself - increases in rate of interest was dovetailed into mortgage deed and no separate agreement varying interest made - held, question of registration with regard to variation did not arise as enhancement in rate of interest was component of mortgage deed. - all india services act, 1951. sections 32(c) (as amended by section 3 of amendment act, 2005] & 10 & general clauses act, 1897, section 6: [g.s. singhvi, cj, dr.g. yethirajulu, ramesh ranganathan, g.bhavani prasad, c.v. nagarjuna reddy, jj] exemption of building from applicability of provisions of act held, (per majority) section 32(c) of the act provides that the provisions of the act shall not apply to any building the rent of which as on the date of the commencement of the a.p. buildings ( lease, rent and..........the plaintiff to revise the rate of interest cannot be considered as unilateral action and separate registration of the mortgage deed incorporating the revised rates of interest is not necessary and the want of registration is not fatal to the enforcement of ex. a-1 and found other issues also against the defendant and passed a preliminary decree.3. in the appeal the learned counsel for the appellants confined himself to two-fold contention viz., that the enhancement of interest at the instance of the plaintiff unilaterally is not justified and is not binding on the defendants and further in any event the absence of registration incorporating the revised rate of interest does not enable the plaintiff to enforce the mortgage deed on the basis of the revised rate of interest. the.....
Judgment:

Ramarao, J.

1. The appellants are defendants 3 to 5 and 8. The plaintiff is A. P. Small Scale Industrial Development Corporation Ltd. the suit is filed for a preliminary decree for recovery of the said amount by sale of plaint B and C schedules and leasehold interest in the property covered by plaint Schedule A and for a personal decree against defendants 2 to 7, if the proceeds of the sale of plaint, A, B and C Schedule properties are not sufficient to satisfy the claim. The contesting defendants and defendants 3, 4, 5 and 8. The 1st defendant is a firm and it is taken over by defendant 8, a limited company. Defendants 3 to 7 are partners of defendant 1 firm. The plaintiff did not prosecute the suit against defendants 6 and 7. The defendant 5 is the Managing Director of defendant 8. The averments in the plaint are as follows : On 6-3-1965 the plaintiff sanctioned a loan of Rupees 95,000/- and out of the said sum the sum of Rs. 93,770/- was paid. The rate of interest stipulated is 7 1/2 % p. a. Thereafter defendant 1 executed a simple mortgage deed dated 26-6-1965 Ex. A-1 hypothecating the plaint A, B and C schedule properties in favour of the plaintiff. Under the terms of mortgage deed the loan amount was repayable in 10 equal instalments of Rs. 9,377/- each together with interest payable every half year on 2nd January and 1st July of each year. The defendants agreed to abide by the terms and conditions of the financial assistance to be given by the plaintiff Corporation according to the provisions contained in the book-let Ex. A-2 designated as 'Terms and Conditions for finance assistance'. The plaintiff by its resolution dated 4-9-1967 revised the rate of interest on the principal amount of the loan from 71/2 % to 8% p.a. and the rate of interest on defaulted payments either on principal or interest from 71/2 % to 12% p.a. The revised rates of interest were brought into force from 1-4-1969. The defendants did not regularly pay the instalments on principal or interest due thereon and they paid Rs. 85,661-17 which was adjusted towards interest on Rs. 92,821-51 p. accrued in accordance with the revised rates of interest. The defendant 8 limited company took over the assets and liabilities of defendant 1 firm. The amount claimed in the suit represented the principal sum of Rupees 93,770/- and interest of Rs. 7160-34 p. Under the terms of the mortgage deed the plaintiff is entitled to demand repayment of the entire loan amount and interest in the event of the default committed by the loanees. Defendants 3 and 4 pleaded that they are not personally liable as that they are not personally liable as they ceased to be partners long before the firm was taken over by defendant 8. The 15th defendant also pleaded that he is not liable personally but on behalf of defendant 8 and in his capacity as Managing Director pleaded in the written statement that the increased rate of interest cannot be collected as the plaintiff company cannot enhance the same without the consent of the defendants and the appropriation of the entire amount of Rs. 85,661-17 towards interest is wrong and the sum of Rs. 24,541-84 p. only has to be adjusted towards principal amount of the loan.

2. On the basis of these findings the relevant issues have been framed. The court below found that the mortgage deed Ex. A-1 expressly authorises the plaintiff to revise the rate of interest cannot be considered as unilateral action and separate registration of the mortgage deed incorporating the revised rates of interest is not necessary and the want of registration is not fatal to the enforcement of Ex. A-1 and found other issues also against the defendant and passed a preliminary decree.

3. In the appeal the learned counsel for the appellants confined himself to two-fold contention viz., that the enhancement of interest at the instance of the plaintiff unilaterally is not justified and is not binding on the defendants and further in any event the absence of registration incorporating the revised rate of interest does not enable the plaintiff to enforce the mortgage deed on the basis of the revised rate of interest. The learned counsel for the respondent contended that in view of the recitals in the mortgage deed itself enabling the plaintiff to revise the rate of interest, the question of increasing the rate of interest unilaterally does not arise and further in view of the fact that the power to increase the rate of interest is embodies in the mortgage deed itself separate registration is not necessary in the event of increase in the rate of interest.

4. To appreciate the rival contentions it is necessary to have a glimpse of the mortgage deed and particularly Cl. 6 (xxiii) of the mortgage deed are subject to provisions and conditions contained in the booklet entitled 'Terms and conditions for Financial Assistance of the Corporation' including any amendment thereof made from time to time. The plaintiff corporation by resolution dated 4-9-1967 of which due intimation was given to the defendants revised the rate of interest on the principal from 7 1/2% to 8% p.a. and the rate of interest on defaulted payments either on principal or interest from 7 1/2% to 12% p.a. This action of the plaintiff is in corformance with the power conferred upon them by virtue of Cl. 6 (xxiii) of the mortgage deed and the mortgage deed expressly authorises the plaintiff corporation to revise the rate of interest and the defendants having known the implications of this clause executed the mortgage deed and they cannot resile from the same at this stage. Further, the defendants were duly informed of the revised rates of interest and they did not raise any demur at any stage to such enhancement of interest till the suit was filed and the defendants acquiesced in the increase in the rate of interest. Therefore, the finding of the court below that the plaintiff Corporation is authorised and empowered to enhance the rate of interest is confirmed.

5. The other contention pertains to the validity of the enforceability of the revised rates of interest in the absence of a fresh registered instrument by the mortgagor and the mortgagee incorporating the revised rate of interest. The essence of the contention is that the mortgage deed is required to be registered and any amendment or variation to the mortgage deed in respect of any particular also requires registration. The factum of non-registration of the document with reference to the revised rate of interest is not in dispute. The learned counsel referred to the decision of the Supreme Court in Kashinath Bhaskar v. Bhaskar Vishweshar, : [1952]1SCR491 . In this case subsequent to the execution of the mortgages the plea was taken that the mortgages were satisfied pursuant to an agreement executed by the mortgage stating that the liability under the mortgages was wiped out and the agreement formulated certain new terms and conditions. One of the varied terms is that the rate of interest agreed upon in the mortgage deed was reduced to 0.8.0. from 0.14.0 annas % p.m. The Supreme Court held that the extinguishment of diminution of liability is effected by the agreement itself and if the agreement is oral it is hit by proviso to S. 92, Evidence Act, for it rescinds or modifies the contract of mortgage and if it is in writing it is hit by S. 17(1)(b), Registration Act, as the agreement limits or extinguishes the liability under the mortgage. It is further elucidated that if rate of interest is varied whether by increase or decrease the interest in the property is affected and in the event of subsequent agreement enhancing the rate of interest a fresh interest is created and in the event of reduction also the mortgage is affected and as such if the agreement is reduced to writing it has to be necessarily registered. The decision in S. K. Roy v. B. K. Collieries, : [1971]3SCR232 of rent payable. By a registered lease deed dated December 18, 1900 Eastern Coal Co. Ltd. was granted a lease and one of the terms of the lease was that the royalty should be paid at the rate of Re. 1/- per ton. In December, 1951 an agreement was arrived at by which a royalty should be paid at the reduced rate of 0.8.0 per ton instead of Rs. 1/- per ton. The question came up for consideration whether the agreement varying the royalty is admissible for want of registration. In this context it is held as follows. (at p. 752) :-

'It is well settled by now that a document which varies the essential terms of the existing registered lease such as the amount of rent, must be registered'.

As an analogy this decision is cited to demonstrate that any agreement incorporating variation of the terms in a registered document is inadmissible in the absence of registration. In Karam Chand v. Banwari La, under the mortgage deed originally interest was payable at the rate of 3%. The mortgagor placed reliance on letters written on 19th September and 2nd October, 1943 by the mortgagor in which he agreed to raise the rate of interest from 3 to 5 1/2 %. On these facts it was held that the agreement to pay the higher rate of interest requires to be compulsorily registered being a document which creates interest in immoveable property and in the absence of such registration they are clearly inadmissible in evidence. In S. M. Gampawar v. Maltibai, : AIR1974Bom46 the mortgage was silent with regard to rate of interest. The interest was claimed on the basis of a letter written by the mortgagor and the issue that cropped up was whether this letter is admissible in the absence of a registered deed. It was held that the right to receive interest is part of the interest which a mortgagee has in the mortgaged property and when the mortgagee wants to claim interest on the basis of the subsequent letters written by the mortgagor it amounts to a fresh interest in the mortgaged property and such interest cannot be created except by registered instrument in view of provisions of S. 17(b), Registration B. Bhagavathar : AIR1977Mad298 the Madras High Court held that agreement to receive a lesser amount than what was due under the mortgage deed will be hit by the proviso to S. 92(4), Evidence Act. If it is in writing, unless it is registered it will be hit by S. 17(1)(b), Registration Act. In this case it is held the waiver of interest noted in the endorsement not having been registered is inadmissible in evidence as it varied rate of interest originally stipulated in the mortgage deed. In Biharilall v. Harendra Nath : AIR1983Cal209 originally the mortgage was executed by deposit of title deeds and thereafter a deed was executed wherein one of the conditions is to pay interest on the principal sum advanced by way of mortgage by deposit of title deeds. The question that was considered is whether subsequent agreement is inadmissible in the absence of registration. The Calcutta High Court held that the plaintiff cannot enforce the said agreement by demanding payment of interest as it is inadmissible in evidence for want of registration.

6. The principle that emerges from the above decisions is that an agreement varying the terms and conditions of a mortgage deed is compulsorily registrable and in the absence of registration the agreement is not admissible in evidence. The learned counsel for the respondent distinguished the said decisions on the ground that there is no separate agreement in the instant case and the resolution enhancing the rate of interest is sanctioned by the mortgage deed itself and any variation pursuant to the same becomes an integral part of the mortgage Ex. A-1 and as such the claim for enhanced rate of interest is sustainable. We uphold the contention of the learned counsel for the respondent. The mortgage Ex. A-1 visualise the variation in rate of interest in view of Cl. 6 (xxiii) embodied in the same. The escalation in the rate of interest is a sequel to the enabling provision embodied in Ex. A-1 itself and the rate of interest is merged in the mortgage and intertwined inextricably with the other recitals and provisions in the deed. It the decisions cited by the learned counsel for the appellant the variance is hedged in by a separate agreement subsequent to the original deed contemplated or conceived the change at a subsequent stage. In the instant case the original document itself explicitly postulates the amendment and the mortgagee is empowered to change or streamline the terms and conditions that may be brought from time to time in the book-let of terms and conditions for finance. The enhancement in the rate of interest is assimilated in the document itself as Ex. A-1 contemplated taking in amendments. The separate agreement or entity varying the terms and conditions is not present in this case and increases in the rate of interest is dovetailed into the mortgage deed. Ex. A-1 is a registered document and as the enhancement in the rate of interest is a component of Ex. A-1 the question of registration with regard to variation does not arise. In this view, the enhancement in the rate of interest cannot be negatived on the plea of want of registration. We approve the conclusion of the court below though we are not able to endorse the approach.

7. The judgment and decree of the court below is confirmed. Appeal dismissed. No costs.

8. Appeal dismissed.


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