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The Indian Overseas Bank Ltd. Vs. R.E.M. Ibrahim and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai High Court
Decided On
Case NumberAppeal No. 858 of 1967
Judge
Reported inAIR1975Mad92
ActsTransfer of Property Act, 1882 - Sections 82
AppellantThe Indian Overseas Bank Ltd.
RespondentR.E.M. Ibrahim and ors.
Appellant AdvocateR. Vijayan, Adv.
Respondent AdvocateD. Ramaswamy Iyengar and ;R. Krishnamachari, Advs.
Disposition Appeal dismissed
Cases ReferredNarayanan v. Nallammal
Excerpt:
.....defendant - appeal dismissed. - - an appeal against the same by the eighth defendant was also unsuccessful. the earlier section was not couched in happy..........the result was that the plaintiff's charge was available only over items 1, 2 and 4 of the b schedule properties. in order to realise the costs, the plaintiff filed execution petitions and finally, the three items of properties were brought to sale subject to the plaintiff's mortgage right. ultimately, the properties were sold in different lots in which items 1 and 2 were purchased by the plaintiff itself and item no. 4 by the second defendant, through his agent, the third defendant. the sales were duly confirmed. item no. 4 above referred to was the 14/48th share of the first defendant in the said property. it appears that subsequent to the mortgage by the first defendant in favour of the plaintiff the eighth defendant and another as lessees of the first defendant filed o. s. no......
Judgment:

Ramaprasada Rao, J.

1. The plaintiff in O. S. No. 26 of 1966 on the file of the Court of the Subordinate Judge of Kumbakonam is the appellant herein. It is a banking company. The first defendant in the course of his business borrowed monies from the plaintiff-bank at Madras, Penang, Malacca and Singapore. Pursuant thereto, large amounts were due and payable by the first defendant to the plaintiff. In order to safeguard the interests of the bank, the first defendant executed an agreement on 10-1-1949 at Madras undertaking to execute a mortgage over all the immovable properties owned by him in India in favour of the plaintiff-bank. He, however, did not respect the covenants in the said agreement. The bank had to file in O. S. No. 25 of 1952 on the file of the Court of the Subordinate Judge, Kumbakonam for specific performance of the contract to execute a mortgage bond for a sum of Rs. 50,000. On 14-7-1953, the said suit for specific performance was decreed directing the first defendant to execute a mortgage over the properties described in the B Schedule to the plaint comprising of four items. Even then the first defendant did not execute the deed of mortgage. It became necessary for the Court through its accredited officer to execute such a mortgage on 28-1-1964 in favour of the plaintiff for a sum of Rupees 50,000, over the aforesaid four items described in the B schedule to the plaint. The suit for specific performance was decreed with costs. To realise the costs, the plaintiff filed several execution petitions. During the pendency of such execution petitions, one Hathija Bivi instituted a suit in O. S. No. 162 of 1962 on the file of the Court of the District Munsif of Valangiman at Kumbakonam for a declaration that item No. 3 of the four items comprised in B schedule was her property and the first defendant had no interest thereon. The said Hathija Bivi succeeded. The result was that the plaintiff's charge was available only over items 1, 2 and 4 of the B schedule properties. In order to realise the costs, the plaintiff filed execution petitions and finally, the three items of properties were brought to sale subject to the plaintiff's mortgage right. Ultimately, the properties were sold in different lots in which items 1 and 2 were purchased by the plaintiff itself and item No. 4 by the second defendant, through his agent, the third defendant. The sales were duly confirmed. Item No. 4 above referred to was the 14/48th share of the first defendant in the said property. It appears that subsequent to the mortgage by the first defendant in favour of the plaintiff the eighth defendant and another as lessees of the first defendant filed O. S. No. 83 of 1958 on the file of the court of the District Munsif, Kumbakonam againstthe other sharers of the property for partition and separate possession, and obtained a decree therein. In the final decree passed by the competent court, the properties described in Schedule A to the plaint herein were allotted to the first defendant. The second defendant by reason of her purchase of the fourth item in the court auction as above and as a result of the final decree in the suit ior partition referred to, obtained delivery of the A Schedule property in lieu of her share in the fourth item of the B Schedule properties. It is the case of the plaintiff that the A Schedule properties have thus become a substituted security to them in the place of the fourth item of the B Schedule. The plaintiff claims that on the date of the suit, a sum of Rupees 87,716.66 was due and payable on the mortgage which was still subsisting, the charge over which extended over items 1, 2 and 4 of the B Schedule properties.

2. It is not in dispute that the first item was sold in court auction for a sum of Rs. 3.650, the second item for Rs. 305 and the fourth item for Rs. 710. The plaintiff's case is that as the mortgage was still subsisting, the present owners of the properties, other than items 1 and 2 are liable to contribute in proportion to the price fetched at the auction for the properties which were the subject-matter of the hypotheca. Thus calculated, the plaintiff claims a sum of Rs. 13,352.37 from the second defendant who by virtue of a partition action referred to by us already (O. S. No. 83 of 1958 on the file of the court of the District Munsif, Kumbakonam) has become the owner of the A schedule properties in lieu of item No. 4 of the B schedule properties. Defendant 3 was only acting as the agent of the second defendant; but he was im-pleaded as a party. Defendants 4 to 7 are tenants in the property described as item No. 4 in the B schedule. The eighth defendant claims to be the purchaser of the said property during the pendency of the attachment effected by the plaintiff in the earlier action. But when he sought to recover possession of the properties by instituting a suit in O. S. No. 62 of 1963 on the file of the Court of the District Munsif, Kumbakonam, that was dismissed. An appeal against the same by the eighth defendant was also unsuccessful. But the eighth defendant was added as a party to the action as a necessary or a proper party. It was in those circumstances, the plaintiff claims contribution from the second defendant of a sum of Rs. 13,352-37. In fact, it sought for a preliminary decree and in default of the payment of the amount, for a final decree enabling the plaintiff to bring the A Schedule property which was the substitutedsecurity for sale for the realisation of the amount.

3. So far as defendants 3 to 8 are concerned, defendant 3 is an unnecessary party as he was acting only as the agent of the second defendant. The eighth defendant appears to be a proper party and the second defendant was the main contesting defendant. His case was that the contribution as worked out by the plaintiff is not correct and for purposes of ascertaining the quantum of contribution payable by him, item No. 3 of the B Schedule properties also should be taken and the proportionate liability calculated thereafter. The yardstick adopted by the plaintiff to assign the contribution to persons legally liable to so contribute is not accepted by the defendants. In any event, the second defendant would state that the proportionate liability should be worked out on the value of the properties on the date of the mortgage and not on the basis of the value which the properties fetched at the time of the auction.

4. On these pleadings, the learned Subordinate Judge, Kumbakonam framed the following issues:--

1. What is the time at which the proportionate liability of the mortgage properties has to be fixed?

2. What is the value of the properties at such time?

3. What are the amounts payable by the A Schedule?

4. Whether the 3rd item of plaint B Schedule has validly gone out of the hypotheca?

5. Whether defendants 3, 4 and 6 to 6 are necessary parties to this suit?

6. To what relief?

5. The learned Subordinate Judge finally ascertained the value of the properties on the date of the mortgage and apportioned the liability as between the plaintiff and the second defendant. He did not accept the contention of the second defendant that item No. 3 of the B Schedule properties should also be taken into consideration for purposes of such apportionment. He held that the third defendant was not a necessary party and was of the view that the remaining defendants were in any event proper parties. After ascertaining the value of the properties on the date of the mortgage, he apportioned the liability and directed that the second defendant should pay a contribution of Rs. 2,816 with interest and granted her the usual time and passed a preliminary decree as prayed for. It is as against this, the plaintiff has preferred this appeal.

6. Mr. Ramakrishnan. learned counsel for the appellant contends that the lower court was wrong in having adopted the principle of evaluating theproperties on the date of the mortgage. According to him, under Section 82 of the Transfer of Property Act -- even after its amendment in 1929, the contribution has to be apportioned by evaluating the properties as on the date when the properties are ultimately sold subject to mortgage or when a legal necessity to evaluate such contribution arises. In the alternative, he would fairly state that if the hypotheca has to be evalued on the date of the mortgage and not on any other date, the value adopted by the court below is not susceptible to challenge since there is no evidence let in on record by the plaintiff particularly for evaluation of the properties as on the date of the mortgage. The second defendant has filed a Memorandum of Objections. In the Memorandum of Objections, it is stated that item No. 3 of the B Schedule also should be taken into consideration to ascertain the proportion of liability and that not having been done, the judgment and decree of the court below suffers from infirmity.

7. Mr. Ramaswamy Iyengar at the time of the arguments is unable to dislodge the findings which has become final by which item No. 3 of the B Schedule properties has gone out of the picture and the first defendant himself had not the requisite interest in it when he agreed to mortgage the property in favour of the bank. In those circumstances, the Memorandum of Objections is not seriously pressed before us.

8. The only question that arises for consideration in the appeal is as to what is the interpretation which Section 82 of the Transfer of Property Act is capable of. Section 82 of the Act runs as follows :

'Where property subject to a mortgage belongs to two or more persons having distinct and separate rights of ownership therein, the different shares in or parts of such property owned by such persons are, in the absence of a contract to the contrary, liable to contribute rateably to the debt secured by the mortgage, and for the purpose of determining the rate at which each such share or part shall contribute, the value thereof shall be deemed to be its value at the date of the mortgage after deduction of the amount of any other mortgage or charge to which it may have been subject on that date.

Where, of two properties belonging to the same owner, one is mortgaged .to secure one debt and then both are mortgaged to secure another debt, and the former debt is paid out of the former property, each property is, in the absence of a contract to the contrary, liable to contribute rateably to the latter debt after deducting the amount of the former debt from the value of the property out of which it has been paid.' The first paragraph of the section was substituted by the Amending Act 20 of 1929. Even in the unamended Act, when such a contingency arises wherein courts are called upon to compute such contribution as is contemplated under the section, it was only the value of the property on the date of the mortgage which was the basis for such computation of the contribution as between the persons liable to contribute. The earlier section was not couched in happy language. The later amendment has made the position very clear. In a case where two or more persons obtain distinct and separate rights of ownership over a property which is admittedly subject to a mortgage, the different sharers are liable to contribute rateably to the pre-existing mortgage debts. The question is as to the rate at which they should contribute when such liability is in dispute. The latter part of Section 82 of the Act makes it clear that for the purpose of determining the rate at which each such share or part shall contribute, the value thereof shall be deemed to be its value at the date of the mortgage after making the necessary deductions. It is therefore clear that there is no option left to courts in cases where they are called upon to reckon the contributions payable by persons who secure distinct and separate rights over the hypotheca during the pendency of the mortgage. No doubt, the parties can enter into a contract for themselves as to the manner in which they intend to distribute among themselves the liability to contribute. If there is such a contract, then such a contract would prevail. But in the absence of such a contract to the contrary, the liability to contribute is founded on the most equitable principle that it should be proportionate to the value of the hypotheca on the date of the mortgage. In Arunagiri v. Radhakrishna AIR 1942 Mad 44 a case which came up before this Court when the section was unamended, the learned Judges were dealing with a case of contribution referred to in Section 82 of the unamended Act. Even there, the language of the section itself was quite clear. But, elucidating this, the learned Judges observed as follows:--

'Once such a right becomes capable of being enforced between mortgagors inter se or what may be regarded as an equivalent of the same right as between a mortgagee who has acquired a share of the equity of redemption and the other persons interested in the equity of redemption of the rest of the property, we should in either case on the principle recognised in Section 82 of the Transfer of Property Act, look back to the value of the various properties asthey existed on the date of the mortgage and abstain from considering the subsequent increase or decrease in their value.' In a Full Bench decision of this Court in Narayanan v. Nallammal AIR 1942 Mad 685 the learned Judges explained the equitable principle behind Section 82 of the Transfer of Property Act. The learned Judges held that the right to contribution rests upon the principle that a property which is equally liable with another to pay a debt shall not be relieved of the entire burden of the debt because the creditor has been paid out of that property alone.

9. As the language of Section 82 of the Transfer of Property Act is explicit and clear, in our view, no alternative method can be adopted for the purpose of ascertaining the rate at which persons who are jointly responsible to contribute should do so. The proportion has to be worked out with reference to the value of the hypotheca on the date of the mortgage and not with reference to any other date. Any other date for such computation would in our view is irrelevant and ought not to be referred to for the purpose of ascertainment of the ratio in question.

10. The learned Subordinate Judge was right in adopting the above principle and evaluating the proportion in the rate of 25 : 5 : 1. We have already said that the value as estimated by the lower court is not challenged before us, since there is no hypothesis for such a challenge. We accept the proportion and in consequence the quantified contribution directed to be paid by the second defendant by the court below. The appeal fails and even so, the Memorandum of Objections. Both of them are dismissed. There will be no order as to costs in both.


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