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Gopala Pillai Vs. the State Bank of Travancore and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKerala High Court
Decided On
Case NumberSecond Appeal No. 641 of 1975
Judge
Reported inAIR1979Ker224
ActsTransfer of Property Act, 1882 - Sections 67; Contract Act, 1872 - Sections 2
AppellantGopala Pillai
RespondentThe State Bank of Travancore and anr.
Appellant Advocate Panicker and; Poti, Advs.
Respondent Advocate K.C. John, Adv.
DispositionAppeal dismissed
Cases ReferredKoru Issakku v. Gottumukkala Seetha
Excerpt:
.....only against the properties allotted to the mortgagor in substitution of his undivided share. p4) that a junior member of a marumakkathayam family, like his counterpart in a mithak-shara family, had an alienable right in the family property. the law is however well settled that a junior member enjoys certain rights in the property. the appellant was well aware of the prior transactions......high court dealt with a mithak-shara family where a co-sharer has the right to alienate joint family property. it was on the basis of such right, counsel submits, that the court held that the principle of substituted security was applicable to enforce a mortgage when upon subsequent partition the mortgaged properties were not allotted to the mortgagor. in the present case, counsel points out, the 1st defendant was a junior member of a marumakkathayam family and she had no alienable interest in the family property. she was therefore not entitled to encumber the property to the prejudice of the other members of her sakha. counsel further submits that encumbrance created by the 1st defendant was totally invalid and it was so held in o. s. no. 51 of 1963. such transaction, counsel says,.....
Judgment:

T. Kochu Thommen, J.

1. This appeal arises from a suit for recovery of amounts due under a mortgage evidenced by Ext. P-4 dated 29-11-1954. The appellant who is the 2nd defendant is a transferee from the 1st defendant of Item 2 of the plaint Schedule under Ext. P-21 dated 18-7-1963.

2. The facts may be briefly stated On deposit of title deeds by the 1st defendant with the plaintiff-Bank as evidenced by Ext. P4 memorandum dated 29-11-1954, the Bank granted in favour of the 1st defendant a loan for a sum of Rs. 5,000/-. The equitable mortgage was in respect of a property obtained by the 1st defendant and her son under Ext. P3 partition dated 14-11-1109 M. E. The property mortgaged is item 1 of the plaint schedule. At the time of Ext. P-3 the 1st defendant had only a minor son aged 2 years. Three sons were born to her after the partition. At the time of Ext. F4, save the first son, all the others were minors. O. S. No. 51 of 1963 was Instituted by the Bank for the realisation of the amounts due from the 1st defendant under the loan arrangement. Her sons figured in that suit as defendants 2 to 5. They questioned the validity of the equitable mortgage (Ext. P4) on the ground that the 1st defendant was not the absolute owner of the property and she had no right to alienate the same. The suit was decreed in respect of one-half share. On appeal by defendants 2 to 5 it was held by this Court that the equitable mortgage created by the 1st defendant was not enforceable as the property was jointly held by the 1st defendant and her children. This Court, however, accepted the submission made on behalf of the Bank that the share allotted to the 1st defendant under a subsequent partition was to be treated as substituted security. It was 'held as follows)

'There will therefore be a decree for the suit amount against the properties allotted to the 2nd respondent (the 1st defendant) as his (sic. her) share in the aforementioned partition of 1962'.

This Court thus upheld the principle of substituted security in respect of the mortgage obligation of the 1st defendant in that suit who is also the 1st defendant in the present suit. The present suit was instituted by the Bank for the enforcement of the mortgage against the substituted security.

3. Both the courts on the basis of the principle in Koru Issaku v. Gottumukkala Seetharamaraju (AIR 1948 Mad 1) (FB) held that the property allotted to the 1st defendant under Ext. P16 partition dated 24-4-1962 was to be regarded as substituted security against which the Bank was entitled to enforce the mortgage obligation. Both the courts found that the appellant, the 2nd defendant, had notice of the equitable mortgage granted by the 1st defendant prior to Ext. P16 partition. The courts also found that the subsequent alienation in favour of the 2nd defendant was a sham transaction with a view to creating evidence to defeat the legitimate claims of the Bank. The courts took into account the fact that the 2nd defendant is the father-in-law of the 3rd defendant in O. S. No. 51 of 1963 who is one of the sons of the 1st defendant. The courts held that the 2nd defendant who is a transferee with due notice of the prior transactions could not be heard to contend that the principle of substituted security was of no avail to the plaintiff-Bank.

4. In Koru Issakku v. GottumukkalaSeetharamaraju (AIR 1948 Mad 1) (FB), Rajamannar J. (as he then was), speaking for the Full Bench, stated as follows :

'It has now been well established that when one of two or more co-sharers mortgages his undivided share in the properties held jointly by them the mortgagee takes the security subject to the right of the other co-sharers to enforce a partition and if the mortgage is followed by a partition and the mortgaged properties are allotted to the other cosharers they take these properties in the absence of fraud free from the mortgage and the mortgagee can proceed only against the properties allotted to the mortgagor in substitution of his undivided share. This rule is sometimes described as the rule of substituted security and so far as Courts in India are concerned it is traced to the decision of the Judicial Committee in (1873) 1 Ind App 106 (PC)',

(See also the decision in Mahomed Afzal Khan v. Abdul Rahman, AIR 1932 PC 235).

5. Appellant's counsel, Shri P. G. Parameswara Panicker submits that the principle in Koru Issaku v. Gottumukkala Seetharamaraju (AIR 1948 Mad 1 (FB)) has no application to a Marumakkatha-yam family. Counsel states that the Madras High Court dealt with a Mithak-shara family where a co-sharer has the right to alienate joint family property. It was on the basis of such right, counsel submits, that the court held that the principle of substituted security was applicable to enforce a mortgage when upon subsequent partition the mortgaged properties were not allotted to the mortgagor. In the present case, counsel points out, the 1st defendant was a junior member of a Marumakkathayam family and she had no alienable interest in the family property. She was therefore not entitled to encumber the property to the prejudice of the other members of her sakha. Counsel further submits that encumbrance created by the 1st defendant was totally invalid and it was so held in O. S. No. 51 of 1963. Such transaction, counsel says, is void ab initio and the principle of substituted security cannot save it.

6. It was understood at the time ofthe deposit of documents (Ext. P4) that a junior member of a Marumakkathayam family, like his counterpart in a Mithak-shara family, had an alienable right in the family property. That was how the law was then understood. See: Bank of New India Ltd. v. Sukumari Ponnamma, (1960 Ker LT 698 (FB)) and Bhavani Amma v, Madhavi Amma (1963 Ker LT 853 (FB)). It was on the basis of such understanding of the law that the parties entered into the transaction. The conception of the law, however, underwent a drastic change with the decisions of this Court in Ammalu Amma v. Lakshmi Amma (1966 Ker LT 32 (FB)) and Mary Cheriyan v. Bhargavi Pillai Bhasura Devi (1967 Ker LT 430 (FB)). It was held in the former case that, unlike in Hindu law. the individual share of a Maru-makkathayee could not be sold or encumbered. In the latter case it was held that the property allotted to a female member of a Marumakkathayam family was held by her as the founder of a sakha. When a child was born or adopted into that sakha, the property would have all the characteristics of a tarwad property and the members of that sakha would hold the same jointly.

7. It is true that property held by a junior member of a Marumakkathayam jfamily is not alienable. The law is however well settled that a junior member enjoys certain rights in the property. If he acts without capacity by acting in excess of his rights and mortgages the property, the other members of the family are entitled to invalidate the mortgage. But until so avoided, the mortgage remains valid and binding. The avoidance of the mortgage does not deprive the mortgagee of his equity. If upon subsequent partition in the family, the mortgaged property is allotted to the mortgagor as his share, the mortgagee undoubtedly will be free to enforce his right against that property notwithstanding the invalidation of the mortgage at the instance of the other members. This is because the mortgage is not void but only voidable. If a transaction is voidable only, it cannot be avoided 90 as to prejudice an innocent party who has for value acquired an interest in the res which is the subject matter of the transaction. (See G. W. Paton. 'A Textbook of Jurisprudence', 3rd Edn., p. 282).

8. If that is the position I see no reason why the principle of substituted security should not apply so as not to defeat the bona fide claim of the mortgagee where the mortgaged property was allotted under a subsequent partition in the family to a member other, than the one who created the mortgage. '

9. In Chacko Mathew v. Ayyappan Kutty, 1962 Ker LT 61 (FB) this Court referred to the distinction between void and voidable. This Court observed:

' 'Void' in common parlance denotesan empty space, and in legal parlance a nullity. A void transaction cannot be of any effect in the eye of law. It is nonexistent. It can therefore be disregarded by the whole world, A 'voidable' transaction, on the other hand, is effective in law but is defective in certain respects, and is therefore liable to avoidance by the persons who are affected by it. For example, a contract vitiated by fraud is not void, but is voidable at the option of the person defrauded.'

Considering the effect of Section 21 of the Travancore Ezhava Act which reads:

'Except for consideration and tarwad necessity and with the written consent of all the major members of the tarwad, no karnavan or other managing member shall sell tarwad immovable property, or mortgage it with possession for a period of more than 12 years, or lease it for a period of more than 12 years.' this Court stated:

'.........an alienation of tarwad immovable property by a karnavan, unsupported by consideration. tarwad necessity or written consent of all the major members of the tarwad, is not void but only voidable at the instance of the tarwad.'

10. Shri Panicker refers to the following observation of Salmond in his work on Jurisprudence (11th Edn., p. 383) which was extracted by this Court in para 8 of the judgment. Salmond says:

'In respect of their legal efficacy agreements are of three kinds, being either valid, void or voidable. A valid agreement is one which is fully operative in accordance with the intent of the parties. A void agreement is one which entirely fails to receive legal recognition or sanction, the declared will of the parties being wholly destitute of legal emcacy. A voidable agreement stands midway between the two cases. It is not a nullity, but its operation is conditional and not absolute. By reason of some defect in its origin it is liable to be destroyed or cancelled at the option of one of the parties to it. On the exercise of this power the agreement not only ceases to have any efficacy, but is deemed to have been void ab initio. The avoidance of it relates back to the making of it. The hypothetical or contingent efficacy which has hitherto been attributed to it wholly disappears, as if it had never existed. In other words, a voidable agreement is one which is void or valid at the election of one of the parties to it......

Void or voidable agreements may be classed together as invalid.'

(emphasis supplied)

The avoidance of a voidable agreement may in certain cases (such as those arising from want of power and governed by the doctrine of ultra vires -- See Cheshire and Fifoot 'The Law of Contract,' Ch. II) relate back to the making of it; but such avoidance cannot divest third parties of their vested rights. When the invalidity of a voidable transaction is declared, on the ground of lack of capacity (as in the case of a minor or a Junior member), at the instance of persons entitled to challenge it, the transaction is void against them (in the sense that it is unenforceable) and not void gainst persons who have acquired rights tinder the transaction. Unlike a void agreement, a voidable agreement is not nullity. It is at once void for certain purposes and valid for other purposes,

11. It is true that the 1st defendant who was only a junior member had no absolute right in the property, for her sakha contained not only herself but also other members. The other members of the sakha were entitled to challenge the validity of the mortgage, which they did in O. S. No. 51 of 1963. The transaction was invalid not because it was void, but because it was voidable. It was invalid only against the other members of the sakha. Its avoidance cannot, therefore, defeat the right of the mortgagee, Just as the mortgagee could have proceeded 'against the property mortgaged, if it had been allotted to the mortgagor, so he can, where such property was allotted to some other members of the family, proceed against any other property allotted to the mortgagor Cor the realisation of the mortgage debt. This is the principle in Koru Issakku v. Gottumukkala Seetha-ramaraju (AIR 1948 Mad 1) (FB). This, is what this Court held in O. S. No, 51 of 1963. This Court stated that the Bank was entitled to realise the mortgage amount from the share allotted to the mortgagor by recourse to the principle of substituted security,

12. Both the Courts held that the 2nd defendant (appellant) was not a bona fide purchaser for value without notice of the prior mortgage. He was no less a person than the father-in-law of one of the sons of the 1st defendant. The appellant was well aware of the prior transactions. In the circumstances there is no substance in the appellant's contention that the Bank is not entitled to proceed against the share allotted to the 1st defendant.

The appeal is accordingly dismissed. In the circumstances of the case, the parties will bear their respective costs.


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