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Raja Sethrucherla Rama Chandra Raju Bahadur Garu v. Maharaja Of Jeypore .
Factual and Procedural Background
This appeal arises from a decree of the Subordinate Judge's Court, Vizagapatam, in a suit brought by the mortgagee to enforce his security. The material facts are not in dispute.
Two mortgage deeds, Exs. A and B, were executed by the defendants in favour of the plaintiff on 4 January 1906 and 4 July 1911 respectively, securing principal sums of Rs. 5,00,000 and Rs. 1,20,000. Their terms were sufficiently similar that they may be treated as one mortgage. The mortgagors agreed to pay the principal on 4 January 1916 and to pay interest year by year on 4 January.
The mortgage stipulated that if interest or principal were not paid when due the mortgagee could take possession of the mortgaged properties and out of net profits pay himself the interest and apply any balance to the principal. Ex. B contained a particular clause relevant to construction, quoted in the opinion as follows:
“If according to the terms of this deed the interest of each year be not paid on the due date, these terms will not prevent you (mortgagee) from recovering the said amount then find there, if you should so desire, without waiting for the due date, namely 4th January 1916”
No interest was paid as stipulated. On 21 July 1913 the mortgagee instituted the present action to recover the whole of the mortgage-money (principal and interest) by sale of the mortgaged properties, on the basis that the clause made the whole amount then due. He alternatively sought possession.
The Subordinate Judge, Vizagapatam, granted a decree for sale (the first Court's decree dated 1 May 1914). The mortgagors (appellants) appealed, raising two principal contentions, and the present opinion decides that appeal.
Legal Issues Presented
- Whether, on the proper construction of the clause in Ex. B, non-payment of interest on the due date made the whole mortgage-money (including principal) immediately recoverable by sale of the mortgaged properties (i.e., whether the mortgagee could recover the principal prior to 4 January 1916 by sale).
- Whether the Subordinate Judge's Court, Vizagapatam, had jurisdiction to grant relief affecting lands situated in the Agency Tracts, given Act 24 of 1839 and the contention that S.17 of the Code does not apply to lands partly within special Agency Tract jurisdiction.
Arguments of the Parties
Appellants' Arguments
- The mortgagee is not entitled to a decree for sale to realise the whole mortgage amount (including principal) prior to the contractual maturity date of 4 January 1916; non-payment of interest does not accelerate the principal.
- At most, upon default in interest payments the mortgagee can recover the interest (by appropriation of net profits) and take possession, and can apply net income towards the principal only if such net income is available.
- The Subordinate Judge lacked jurisdiction to grant relief affecting lands situated in the Agency Tracts because, under Act 24 of 1839, ordinary rules for civil justice ceased to operate there and S.17 of the Code (permitting relief where land lies partly within one Court's jurisdiction and partly in another) does not apply to courts outside the Code.
Respondent's (Plaintiff/Mortgagee) Arguments
- The clause in Ex. B ought to be read as accelerating the whole debt so that the mortgagee could recover principal and interest by sale when interest was not paid on the due date.
- Alternatively, even if the first Court's decree was technically overbroad when made, the present circumstances mean that the plaintiff would now be entitled to the relief granted; the income of the mortgaged property is insufficient to pay interest and the plaintiff can immediately obtain possession and proceed to sale, so the decree should be left undisturbed to avoid multiplicity of litigation and increased costs.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Kannu v. Natesa | Authority for the proposition that a mortgagee cannot sue to recover even accrued interest by sale of hypothecated property until the principal has become due. | The Court observed that the clause in Ex. B appears to be inserted to avoid the consequence of Kannu v. Natesa; it used the case to explain why the clause must be construed as allowing recovery of interest by sale without waiting for principal maturity. |
| Ram Ratan Sahu v. Mohant Sahu | Illustrates that appellate courts can take cognizance of events occurring after institution of the suit for the purpose of moulding the relief, in exceptional cases to prevent injustice or multiplicity of proceedings. | The Court relied on this principle to consider post-institution facts (insufficient income, present entitlement to possession) in deciding whether to disturb the first Court's decree. |
| Mills v. Green | Authority for the proposition that appellate courts may consider subsequent events to mould relief in certain exceptional circumstances. | The Court cited it alongside Ram Ratan Sahu to support taking notice of subsequent events when deciding whether to alter the relief granted by the first Court. |
| Evans v. Bogshaw | Used in discussion of the limits on allowing a plaintiff to claim relief on a new title or fresh cause of action that accrued after institution of the suit. | The Court cited this among authorities to indicate doubt whether a Court may permit a plaintiff to claim relief on a new title arising after the suit began; it then concluded the present case did not present such a new title. |
| Govinda v. Perumdevi | Similar authority concerning limits on post-institution claims/new titles. | Referred to with Evans v. Bogshaw and Tottenham Local Board v. Law Conservancy to show the Court's caution about permitting relief based on a title accruing after commencement of suit. |
| Tottenham Local Board v. Law Conservancy | Another authority cited on the doubt whether relief based on a new title accruing after institution may properly be granted. | Used to support the proposition that the Court should be cautious about allowing new-title relief post-institution; the Court concluded this case was not of that nature. |
Court's Reasoning and Analysis
The Court proceeded in a sequence of analytical steps drawn directly from the facts and the legal provisions and authorities cited in the opinion:
- Construction of the clause in Ex. B: The Court read the clause in its original language and accepted the appellants' construction (as argued by their vakil) that the clause was intended to allow the mortgagee to recover the interest payable by sale of mortgaged property without waiting until 4 January 1916, but that it did not render the principal immediately payable on non-payment of interest. The Court observed that the clause likely was inserted to avoid the effect of Kannu v. Natesa, which held that a mortgagee could not sell to recover accrued interest until the principal was due.
- Consequence for the first Court's decree: On the dates of institution (21 July 1913) and on the date of the first Court's decree (1 May 1914) the correct construction meant that sale to realise the principal of Rs. 6,20,000 should not have been ordered. The mortgagee was entitled to recover the interest then due by sale of a sufficient portion of the mortgaged property and to obtain possession, and to appropriate net income if available towards principal.
- Consideration of post-institution events on appeal: The respondent argued, and the Court considered, that subsequent events justified leaving the decree undisturbed. The Court summarized established principles (citing Ram Ratan Sahu v. Mohant Sahu and Mills v. Green) that appellate courts may, in exceptional cases, take cognizance of events occurring after institution in order to mould relief, particularly to prevent injustice or multiplicity of proceedings.
- Application to present facts: The Court found that the income of the mortgaged property was insufficient to pay even the interest; the plaintiff could immediately obtain possession and could bring a fresh suit for sale. Any delay would disadvantage both parties; the defendants would not be prejudiced by allowing the first Court's decree to stand. The appellants' counsel conceded that bringing the plaintiff to another suit would only increase costs without benefiting the appellants.
- Distinction from new-title cases: The Court distinguished the present situation from cases where a plaintiff acquires an entirely new title or cause of action after institution, noting authorities that cast doubt on permitting reliefs based on a new title (Evans v. Bogshaw, Govinda v. Perumdevi, Tottenham Local Board v. Law Conservancy). The Court held this was not such a case because the plaintiff already had a right to recover principal (though not by sale) when he instituted the suit and because the insufficiency of income did not convert the nature of the plaintiff’s original right into a new title.
- Jurisdictional objection concerning Agency Tracts: The appellants' additional contention that the Subordinate Judge had no jurisdiction to grant relief regarding lands in the Agency Tracts (because Act 24 of 1839 created special jurisdictional machinery) was taken late as a supplemental ground of appeal. The Court held that this objection amounted to an objection to the "place of suing" within S.21 of the Code (falling within Ss.15–20 on place of suing) and was therefore not open to be raised at this stage. The Court noted the appellants conceded they had no greater defence in the Agency Court than in the present suit.
- Disposition: Taking into account the above, and exercising the appellate court’s discretion to avoid multiplicity of proceedings and injustice, the Court decided not to disturb the decree of the first Court despite the earlier finding about the strict construction of the clause, and proceeded to dismiss the appeal.
Holding and Implications
HOLDING: The appeal is DISMISSED. The decree of the Subordinate Judge's Court, Vizagapatam, stands, and the appellants are ordered to pay costs. Time for redemption is fixed as six months from the date of this judgment.
Immediate consequences for the parties:
- The mortgagee's decree for sale and possession as made by the first Court is not disturbed by this appellate Court.
- The mortgagee may proceed in accordance with the decree; the time for redemption granted to the mortgagors is six months from the date of this judgment.
The opinion does not purport to lay down a broad new principle of law; rather it applies established principles about construction of mortgage clauses, the limited circumstances in which appellate courts may consider events after institution, and procedural rules on objections to place of suing. The Court expressly treated the question of acceleration of principal as determined by the clause's construction and resolved the jurisdictional objection on procedural grounds (S.21), not on the substantive effect of Act 24 of 1839.
1. This is an appeal from the decree of the Subordinate Judge's Court, Vizagapatam, in a suit by the mortgagee to enforce his security. The facts which raise the questions for determination in ibis appeal are not; in dispute. Exs. A and B are two mortgages executed on 4th January 1906 and 4th July 1911 by the defendants to the plaintiff to secure the principal sum of rupees five lakhs and one lakh twenty thousand respectively; they may however be taken as one mortgage inasmuch as the terms of the one were incorporated in the other. The mortgagors agreed to the principal amount on 4th January 1916 and to pay interest in the meantime year by year on 4th January each year. If the interest or the principal was not paid on the due dates, the mortgagee was entitled to take possession of the mortgaged properties and out of the net profits, to pay himself the interest due, and appropriate the balance, if any, to pay the principal. There is a stipulation in Ex. B on the construction of which depends one of the points for determination in this appeal. It is as follows:
“If according to the terms of this deed the interest of each year be not paid on the due date, these terms will not prevent you (mortgagee) from recovering the said amount then find there, if you should so desire, without waiting for the due date, namely 4th January 1916”
2. No interest was paid in accordance with the stipulations of the mortgagebond, and on 21st July 1913 the mortgagee brought the present action to recover the whole of the mortgage amount, both principal and interest, by sale of the mortgaged properties, on the basis that on the true construction of the clause above set out, the whole of the mortgage-money including the principal had become due.
3. He also asked in the alternative for possession of the mortgaged properties. Only one other fact need be mentioned, and that is that a portion of the mortgaged property is situated in the Agency Tracts of Vizagapatam. The learned Subordinate Judge has given the mortgagee a decree for sale. On these facts the appellants, the mortgagors, raised two contentions: (1) that the mortgagee is not entitled to a decree for sale to realise the whole of the mortgage amount including the principal, but can only recover the amount of interest due, without waiting for the date when the principal amount would become due, and that the non-payment of interest on the due date or dates does not entitle the mortgagee to demand payment of the principal at once; that at the best, he can only recover possession of the mortgaged properties and pay himself the interest and also portions of the principal if the net income is available for that purpose. The learned Subordinate Judge came to the conclusion, and we think rightly, that the mortgage was primarily a simple mortgage, though in certain events it can be converted into a usufructuary mortgage; but he did not consider the question, whether by non-payment of interest on the due dates the principal amount became payable before 4th January 1916 so as to entitle the mortgagee to enforce the security, by sale of the mortgaged properties and obtain payment also of the principal.
4. We have had the clause read to us in the original and have no doubt that the correct interpretation of the clause is, as contended by the learned vakil for the appellant, that the mortgagee can recover the interest payable by sale of the mortgaged properties without waiting for the time when the principal amount would become due. Aa suggested by Mr. Ramesam, it is likely that clause was specially put in to avoid the contention given effect to in the case of Kannu v. Natesa(1), that the mortgagee cannot sue to recover even the interest which had accrued due by the sale of the hypothecated property till after the principal amount had become due. The documents, it may be noted, were drafted by the pleader for the mortgagee. It is therefore clear that on the date when the present action was brought and also on the date on which the first Court passed the decree, viz., 1st May 1914, the sale of the mortgaged property to realise the principal amount of six lakhs and twenty thousand rupees should not have been ordered.
5. The mortgagee was entitled to recover the interest then due by sale of a sufficient portion of the mortgaged property and also to obtain possession of the same as mortgagee. It is however contended for the respondent that in the circumstances of the case we should not disturb the decree of the first Court, inasmuch as the plaintiff would now be entitled to that decree. It is clear that the income of the mortgaged property is insufficient to pay even the interest, that the plaintiff can at once bring a suit for sale and can also take possession of the property immediately, that any delay in the sale of the property could only be disadvantageous to both the parties and that the defendants are not in any way prejudiced by the present decree standing. Mr. Ramesam frankly conceded that driving the plaintiff to another suit would only increase the costs, without in any way benefiting his clients.
6. It has been held in several cases that the appellate Court can take cognizance of matters which happened after the institution of the suit for the purpose at any rate, of moulding the relief which the plaintiff was entitled to. No doubt this will be done only in exceptional cases, where it is necessary to prevent injustice or avoid multiplicity of proceedings. In cases where the plaintiff who had a title to relief at the inception of the suit had subsequently lost it, or was entitled to a discretionary relief such as an injunction which the subsequent events make it unjust to grant, or when a new defence to the claim had accrued to the defendant after the institution of the suit, or when the Court could not grant the relief which the plaintiff was entitled to by events which happened subsequently owing to no fault of the parties, appellate Courts can, and in some cases may be bound to, take notice of events which happened subsequently [Ram Ratan Sahu v. Mohant Sahu(2) and Mills v. Green(3)]. A familiar instance in India is a suit for partition. It is however doubtful whether even under the very extended powers of amendment conferred by O. 6, R. 17, corresponding to O. 28, R. 12, English Rules, a Court has power to allow a plaintiff to claim reliefs to which he was not entitled at the time of the action on a new title which accrued after. Evans v. Bogshaw(4), Govinda v. Perumdevi(5) and Tottenham Local Board v. Law Conservancy(6). In this case the plaintiff when be brought his action had a right to recover even the principal amount, though not by sale of the property. If, for instance, the income from the mortgaged property had been much more than sufficient to pay the interest, or if, by accident, the income had greatly increased, the mortgagors at any rate thought there were valuable mines in their estate: (see Ex. 9) the mortgagee would be entitled to appropriate it towards the principal. That as a matter of fact, the income was insufficient even to pay the interest does not affect the question. We, therefore, think that this is not a case of an entirely new title or a wholly fresh cause of action which has accrued to the plaintiff since the suit.
7. Though ordinarily we would have given a decree to the plaintiff for possession of the mortgaged properties and a decree for the interest due, with a right to bring a sufficient portion of the mortgaged property to sale for recovering that interest, in the circumstances of this case, we think it unnecessary to interfere with the decree passed by the first Court. The other point taken by the appellants is this: that the Subordinate Judge's Court, Vizagapatam, had no jurisdiction to grant any relief respecting lands situate in the Agency Tracts, as under Act 24 of 1839, the operation of the ordinary rules for the administration of civil justice ceased to have effect in those tracts, and a special machinery with special rules for the administration of justice was created. S. 17 of the Code, which gives jurisdiction to a Court to give relief in suits for lands-part of which is within its jurisdiction and part within the jurisdiction of another Court, does not apply. It is contended that section applies only to cases where both the Courts are governed by the Code of Civil Procedure. This objection was, however, not taken in the first Court nor even in appeal at the time when it was filed, but was taken long after as a supplemental ground of appeal. Mr. Sarma, for the respondent, contends that this is an objection to the “place of suing” within the meaning of S. 21 of the Code and we are not, therefore, at liberty to give effect to this contention even if it is sound.
8. We agree with Mr. Sarma that we are precluded from allowing this objection. Mr. Ramesam contends that S. 21 does not apply to this case, because his objection is not to the “place of suing” as his contention is not that the Vizagapatam Court was not the proper Court to entertain the suit, but only that it cannot give relief respecting immovable properties in the Agency Tracts. S. 21 follows Ss. 15 to 20 which regulate the place of suing, and an examination of those sections shows that a contest might arise as to the place of Ruing with reference to the cause of action, the residence of the defendant or defendants or the situation of property both movable and immovable. In all cases where objection is taken that the Court taking cognizance of the suit is not entitled to adjudicate upon the claim, whether in whole or in part, for want of jurisdiction, it is an objection to the place of suing. We are, therefore, of opinion that this contention is not now open to the appellant. We have come to this conclusion the more readily as it is conceded by the learned pleader for the appellant that his clients had no more defence to an action instituted in the Agency Court than they had to the present suit. The appeal must, therefore, be dismissed with costs. Time for redemption six months from this date.
S.N/R.K
9. Appeal dismissed.
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