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Case Number
Judges
  • Macleod, C.J
  • Shah, J.
Acts
  • provisions of Regulation V of 1827. Clause 15 of the Regulation
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Macleod, C.J
  • Shah, J.
Acts
  • provisions of Regulation V of 1827. Clause 15 of the Regulation
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Smart Summary

Structured Summary of the Opinion (Macleod, C.J.)

Factual and Procedural Background

The plaintiffs (mortgagees) sued to recover Rs. 5,00,001 and interest and to enforce their alleged mortgage rights by sale or foreclosure in respect of certain immoveable properties situated in Belgaum, Kolhapur, Sawantwadi, Kurundwad and Satara. The suit was instituted in the First Class Subordinate Judge's Court at Satara against the mortgagors or their representatives. Certain issues were framed as preliminary and, from the Subordinate Judge's decision on those issues, an appeal was filed to the High Court (F.A. No. 39 of 1913; the original suit was No. 604 of 1910 in the Satara Court). On that appeal the issues were decided in favour of the plaintiffs and the suit continued in the Subordinate Judge's Court.

At trial the learned Subordinate Judge resolved several issues in the plaintiffs' favour (including that the mortgaged property was not Devasthan or Saranjam) but on the question of remedies he held: (a) that the claim for possession was in time only in respect of the Kolhapur State properties; and (b) that the plaintiffs were not entitled to sell or foreclose. The Judge therefore passed a decree on accounts providing that the defendants or any one of them should pay Rs. 3,31,000-0-8 and plaintiffs' costs in proportion within six months, and that on default the plaintiffs could recover possession of the villages in the Kolhapur State only. The Judge declined to allow any further interest from the date of the suit until the date of the decree or realization.

The plaintiffs appealed from the decree and argued (as framed in the Court) three principal points: entitlement to an order for sale; entitlement to possession of all mortgaged properties; and the correctness of the decision on interest.

Legal Issues Presented

  1. Whether the learned Subordinate Judge was wrong in holding that the plaintiffs were not entitled to an order for sale of the mortgaged properties.
  2. Whether the plaintiffs were entitled to possession of all the mortgaged properties (rather than only those in the Kolhapur State).
  3. Whether the learned Judge's decision disallowing all further interest from the date of the suit was correct.

Arguments of the Parties

Plaintiffs' Arguments

  • The plaintiffs contended that, under the form of the mortgage bonds (all in the same form as Exhibit 38) and under Regulation V of 1827 (Clause 15, paragraph 3), they were entitled to institute a civil suit to cause the mortgaged property to be applied to liquidation of the debt in the absence of any special agreement preventing sale.
  • They argued that no special agreement existed in the documents to prevent the mortgagee from selling the security, and that a covenant by the mortgagor to repay (a personal covenant) did not preclude the mortgagee's right to seek sale of the security.
  • They argued that they were entitled to possession of the Kolhapur properties and to bring those properties to sale on default; and that interest should run from the date of the suit until realization.

Defendants' Arguments

  • The defendants contended that the mortgaged properties were Devasthan and Saranjam and thus not alienable or not liable to be mortgaged.
  • They argued that the plaintiffs were debarred from instituting a civil suit to cause the properties to be applied to liquidation of the debt (the learned Judge accepted this contention).
  • They suggested (in resisting recovery of British-territory properties) that possession of one set of properties might preserve limitation or rights as to the other, i.e., that possession of the Kolhapur properties before 1902 protected the plaintiffs' rights over properties in British territory; however, no authority was cited for that proposition.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Gopal Ramchandra v. Gangaram Anand Shet Full Bench ruling relied on to exclude application of the rule of Damdupat to the terms of the mortgage bond in this case (as noted by Shah, J.). Shah, J. expressly referred to this Full Bench ruling to support the view that the rule of Damdupat did not apply given the terms of the mortgages before the Court. The main Judgment (Macleod, C.J.) addressed the Damdupat principle substantively in context but the Full Bench case was cited by Shah, J. to confirm exclusion of that rule.

Court's Reasoning and Analysis

The Court conducted a textual and factual analysis focusing on the mortgage bonds and Regulation V of 1827 (Clause 15). The Court set out and applied the three paragraphs of Clause 15 (as reproduced in the opinion), focusing particularly on paragraph 3 which provides that, in the absence of any special agreement, either party may at any time by institution of a civil suit cause the property to be applied to liquidation of the debt.

Application to the mortgage documents:

  • The bonds (e.g., Exhibit 38) uniformly placed the mortgagee in possession, provided for annual accounts of rents and profits (1st of Ashadh Vad), and contemplated settlement of balances between parties; they also contained a clause for release of villages if mortgagors repaid from other sources.
  • The Court examined the documents for any "special agreement" that would prevent the mortgagee from seeking sale; it found none. In particular the Court held that a mortgagor's covenant to repay is a personal obligation and does not constitute a special agreement barring the mortgagee from instituting a suit against the security.
  • On this basis the Court concluded the plaintiffs were entitled to institute a suit for sale in relation to the Kolhapur properties: the learned Subordinate Judge's contrary conclusion was rejected.

Possession and the British-territory properties:

  • The defendants argued that possession of the Kolhapur properties preserved plaintiffs' rights over the British-territory properties. No authority was cited for that proposition and the Court declined to decide the broader hypothetical point.
  • Rather, the Court relied on the evidentiary record: it found the British-territory properties had been given back to the mortgagors before 1860 and that no steps were taken to recover them until this suit. That lapse, together with a contemporaneous petition (Exhibit 58, dated 16 Aug 1879) and the government resolution which dealt only with Kolhapur properties, supported a presumption that the parties had agreed the British-territory security was surrendered and that only Kolhapur properties remained as security.
  • Accordingly, the plaintiffs were not entitled to possession of the British-territory properties; the plaintiffs were entitled to possession of the Kolhapur properties.

Devasthan / Saranjam contention:

  • The Court observed that the defendants produced no evidence to support the contention that the properties were Devasthan or Saranjam and thus incapable of being mortgaged. The bond (Exhibit 38) expressly stated funds were borrowed for Sansthan expenses and indicated that the mortgagors were competent to borrow on that security. The defendant's contention on this ground was therefore rejected.

Interest:

  • The Court found the learned Judge was not justified in disallowing all further interest from the date of the suit. The Judge's approach would effectively prevent the plaintiffs from claiming interest unless they regained possession of the Kolhapur properties, which could produce inequitable consequences.
  • Although acknowledging the ordinary rule in usufructuary mortgages (where the mortgagee in possession may hold rents and profits in lieu of interest, i.e., the "rule of Damdupat"), the Court held that when the parties have departed from such terms or the mortgagors have deprived the mortgagees of possession, that principle cannot be treated as binding in the same way and the mortgagors must pay interest.
  • The Court therefore concluded it was equitable and legally appropriate to allow interest on the principal from the date of suit until realization and to add that interest to the decretal amount.

Practical directions and remedies:

  • The Court amended the decree to direct that interest run on the principal from the date of the suit until realization and that this interest be added to the decretal amount to be paid within six months after the proceedings are returned to the trial Court.
  • On default, the plaintiffs will be entitled to bring the Kolhapur properties to sale; the Court left the Judge's earlier direction permitting recovery of possession of the Kolhapur villages intact to avoid practical difficulties, while noting it would be simpler to proceed to sale once the six months expire.
  • If the plaintiffs take possession instead of sale, they must render accounts of rents and profits against interest in accordance with the terms of the mortgages.

Holding and Implications

Holding: Decree amended. The High Court allowed the plaintiffs' appeal in part and amended the Subordinate Judge's decree as follows:

  • Interest shall run on the principal amount from the date of the suit until realization; that interest shall be added to the decretal amount.
  • The defendants must pay the resulting decretal amount (principal plus interest and costs) within six months from the date on which these proceedings are returned to the trial Court.
  • In default, the plaintiffs are entitled to bring the Kolhapur properties to sale (and the Court left intact the Subordinate Judge's direction that plaintiffs may recover possession of the Kolhapur villages).
  • The plaintiffs are entitled to add their costs to the mortgage amount. Defendant No. 2's appeal is dismissed with costs.

Implications:

  • Direct effect on the parties: The plaintiffs obtain an enforceable right to interest from the date of the suit, entitlement to possession of the Kolhapur State properties, and the procedural right to bring those properties to sale on default. The defendants must pay the amended decretal sum within six months or face sale of the Kolhapur properties. The plaintiffs can add costs to the mortgage claim.
  • Scope for broader precedent: The Court applied Clause 15, paragraph 3, of Regulation V of 1827 and found no special agreement in the bonds preventing sale; it also explained the limits of the Damdupat principle where the mortgagors have deprived the mortgagees of possession. Shah, J. cited a Full Bench ruling in Gopal Ramchandra v. Gangaram Anand Shet to support exclusion of the Damdupat rule on the facts. The opinion, however, does not purport to lay down an overruling principle beyond the application to the specific facts before the Court; the decision primarily amends the decree and addresses the parties' rights and remedies in the suit rather than establishing a broad new rule of general application.

Note: All factual recitations, quotations and legal conclusions in this summary are taken directly from the provided opinion and no information has been added that is not contained in that opinion.

Show full summary ...

    Nilkanth Balvant Natu v. Shri Vidyashankar Bharati And Others

    Macleod, C.J:— The plaintiffs claimed to be entitled to recover by sale or foreclosure Rs. 5,00,001 and interest charged upon certain immoveable properties in Belgaum, Kolhapur, Sawantwadi, Kurundwad and Satara. The suit was filed in the First Class Subordinate Judge's Court at Satara against the mortgagors or their representatives to enforce the alleged rights of the mortgagee. Certain issues were taken up at the trial as preliminary issues, and from the decision of the Subordinate Judge on those issues an appeal was filed to the High Court (being F.A No. 39 of 1913, the suit being No. 604 of 1910 of the Satara Court). On appeal the issues ware decided in favour of the plaintiffs and the suit continued in the Subordinate Judge's Court.

    2. It was contended by the defendants that the mortgaged property was Devasthan and Saranjam, and not liable to be mortgaged. The Judge decided this issue in plaintiffs' favour and the decision on the fourth issue would necessarily follow also in their favour. The eleventh issue was whether the claim for possession of any and which of the mortgaged properties was in time. The learned Judge held that the claim for possession of the properties in the Kolhapur State only was in time. On the twelfth issue he held that the plaintiffs were not entitled to sell or to foreclose, and he passed a decree on accounts being taken to the following effect:—

    “The defendants or any one of them should pay Rs. 3,31,000-0-8 and plaintiffs' costs in proportion within six months from the data of the decree. In default the plaintiffs were to recover possession of the villages in the Kolhapur State only. The claim as to other villages is suit was rejected. The learned Judge declined to allow any further interest from the date of suit until the date of the decree or the date of realization.”

    3. The plaintiffs have appealed. Three points have been argued before us.—

    1. Whether the learned Judge was wrong in holding that the plaintiffs were not entitled to an order for sale?

    2. Whether plaintiffs were not entitled to possession of all the mortgaged properties?

    3. Whether the learned Judge's decision on the question of interest was wrong?

    4. The mortgages in this case were entered into between the years 1840 and 1844, and were subject to the provisions of Regulation V of 1827. Clause 15 of the Regulation is as follows:—

    First—When a creditor is placed in possession of properly by mortgage or otherwise as security for a debt, his claim ever such property shall, in the absence of other special agreement, constitute his sole security to payment of the debt, or such pert of it as the said property may have been given in security for, and interest thereon is to be considered as included in the said security.

    Second—If the properly yielded profit and no stipulation has been made respecting the disposal of the said profit, or payment of interest on the debt, the profit stall be considered as equivalent or the interest.

    Third— In the absence of any special agreement, of recognized law or usage to the contrary, either party may at any time, by the institution of a civil suit, cause the property to be applied to the liquidation of the debt, the surplus, if any, being restored to the owner.

    5. Now the various bonds which were entered into by the defendants predecessors were, all, in the same form as Exhibit 38 at p. 13. Interests was to be paid, on the amount advanced, the mortgagee was placed in possession, an account of, rents and profits was to be made up on the 1st of Ashadh Vad in each year, and the amount of balance was to be settled by the parties. If the mortgagors failed to pass the account, they undertook to release the villages after clearing off the total amount of balances which were struck in each year. It was also agreed by the clause which appears at bottom of page 17 that if the mortgagors could get the money from any other source for the repayment of the debt, the mortgagee should accept the amount when it was paid and should release the villages. It has been contended by the plaintiffs that the learned Judge was wrong in holding that the plaintiffs were debarred from instituting a civil suit for the purpose of causing the properties to be applied to the liquidation of debt. We cannot agree with the reasoning of the learned Judge, by which he came to that conclusion. We have to consider paragraph 3 of, clause is of the Regulation V of 1827, and then apply it to the document before us. Unless there is a special agreement between the parties, when the bond is entered into, to the effect that the property shall of be brought to sale by the mortgagee, then the mortgagee has a right to institute a suit for the purpose of bringing the property tog sale. There is no use referring to documents which have been construed in other cases in order to ascertain whether they contained such special agreements. It seems to have been argued before the learned Judge that it was a relevant question whether the document contained a covenant by the mortgagor to repay the mortgage money. But in my opinion that could have no bearing on the question whether or not there has been a special agreement that the mortgagee cannot realize his security by sale. The covenant as to repayment is purely personal, and is only relevant on the question whether a suit can be brought, not against the security, but against the mortgagor for the repayment of the money borrowed. In this document I pan find no evidence whatever of a special agreement such as is relied upon by the defendant. Nor Can it be inferred that the parties agreed that the mortgagee should not sell merely because the mortgagors were entitled to redeem. In my opinion, therefore, the suit for sale was competent and the plaintiffs are entitled to an order for sale of the mortgaged properties in the Kolhapur State.

    6. The plaintiffs are clearly entitled to an order for possession of those, properties and they are further entitled to a decree for sale, if default is made in payment of the decretal amount.

    7. With regard to the properties in British territory, it has been argued that the plaintiffs were entitled to possession of those properties, because they were in possession before 1902 of the mortgaged properties in the Kolhapur State, and possession of one was possession of the other. No authority has been cited before? us for the proposition that if two separate properties are given over into the possession of a usufructuary mortgagee, and if he loses possession of one of the properties, possession, of the other saves limitation with regard to a suit to recover possession of the first property. But in this case we need not decide that point, because we think the evidence is, clear that these properties in British territory were given back to the mortgagors before 1860, and no steps whatever were taken to recover possession until this suit was filed. That we Chink raises she presumption that she parties agreed that the security of the properties in British territory should be given up, and that the Kolhapur properties only should be considered as security for the debt.

    8. We have been referred to a document, Exhibit 58 at p. 53, which was a petition of the then mortgagors dated August 16, 1879, appealing against an order of the Political Agent, Kolhapur and Southern Mara the country, referring them to a Civil Court for redress in the matter of the forcible recovery from them by the Jagadguru of Sankeshwar and Kolhapur of certain Inam villages situated in the Kolhapur territory. That petition and the Resolution of Government thereon dealt only with mortgaged properties in the Kolhapur State, and that to some extent is evidence that the mortgagees and the mortgagors had come to some arrangement with regard to the properties originally mortgaged in British territory, to that in effect the mortgagees agreed to retain their security only on the properties in the Kolhapur territory.

    9. It has been argued by the defendants that the learned Judge was wrong in holding that it is not proved that the properties were not liable to be mortgaged as being Devasthan or Saranjam properties. But they produced no evidence to support their contention, and there is nothing before us from which it can be shown that the mortgagors between 1810 and 1814 were not competent to alienate or mortgage the suit properties. It was particularly stated in the bond Exhibit 38 that the money was borrowed for the expenses of the Sans than, and the mortgagors were competent to borrow for such purposes on the security of the Sansthan property. That is the only point argued in the defendants' appeal, with the exception of the Question of interest which is common to both appeals.

    10. We do not think the Judge was justified in disallowing all further interest from the date of the suit. It would follow from that decision that the plaintiffs would be debarred thereafter from claiming interest unless they could get into possession of the properties in the Kolhapur State, in which case the terms of the mortgage bands would revive, and they would have to render account of rents and profits against the interest due. But all sorts of difficulties may arise in that case if the judgment should stand. Considering that we think that the parties agreed that the mortgaged properties in British territory should be surrendered to the mortgagors, and that the mortgagees only remained in possession of the Kolhapur properties until 1902, when they were deprived of possession, it seems to us inequitable that interest should not run on the principal amount due from the date of the suit. It is quite true in the ordinary case of a usufructuary mortgage where a mortgagee is possession of the mortgaged property either in lieu of interest entirely, or on the terms that he must render an account of rents and profits against interest, that the rule of Damdupat would apply. But when the terms of the mortgage have been departed from, and the mortgagors have deprived the mortgagees of possession, then it seems to me very clear that principle can no longer be considered as binding as the relationship of the parties has changed and the mortgagors must pay interest.

    11. We amend the decree by directing that interest must run on the principal amount from the date of suit until realization, and that amount of interest must be added to the decretal amount, which the defendants must pay within six months from the date these proceedings are returned to the trial Court. In default the plaintiffs will be entitled to bring the properties in the Kolhapur State to sale. There may be difficulties with regard to the sale of the properties. So we had better leave the direction of the Judge as it stands that the plaintiffs can recover possession of the villages in the Kolhapur State. As a matter of fact it will be far simpler if they can bring the properties to sale at once after the six months expire, if default is made. If instead of bringing the properties to sale they go into possession, they must, under the terms of the mortgage, render an account of rents and profits against the interest which becomes due.

    12. The plaintiffs do not ask for any order as to the properties in Savantvadi and Kurundvad. They do not ask for possession of those properties as apparently they have been out of possession for a considerable period. The plaintiffs have been on the whole successful. They will be entitled to add their costs to the mortgage amount. The defendant No. 2's appeal will the dismissed with costs.

    Shah, J.:— I agree. I desire to add a word with reference to the point relating to the applicability of the rule of Damdupat to the facts of this case. Having regard to the terms of the mortgage bond in this case, I think the application of that rule is excluded according to the Full Bench ruling in Gopal Ramchandra v. Gangaram Anand Shet(1).

    13. Decree amended.

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    Comments

    Nilkanth Balvant Natu v. Shri Vidyashankar Bharati And Others
    (Feb 12, 1924)