This appeal of the defendant arises out of the judgment and decree dated 9.9.2015 in R.A.No.668/2014 passed by the VIII Additional District Judge, Mysuru. By the impugned judgment and decree, the First Appellate Court allowed the appeal, reversed the judgment and decree dated 4.12.2013 passed by the Civil Judge, H. D. Kote in O.S.No.281/2009 and decreed the suit of the respondent/plaintiff for recovery of money.
2. The respondent is the elder brother of the appellants son-in-law. The respondent filed O.S.No.281/2009 contending that the defendant borrowed loan of Rs.1,00,000/- on 8.8.2007 for his necessities RSA No.2004/2015 executing Ex.P1, the security document for repayment of the loan. He further contended that the defendant agreed to repay the loan with interest at the rate of 1.5% per month within three years and offered his land bearing Survey No.28 of Machanayakanahalli Village, H. D. Kote, measuring 2 acres 6 guntas as security. He contended that despite his demand notice dated 13.10.2009, the defendant failed to pay the amount.
3. The appellant/defendant contested the suit denying the execution of Ex.P1 and availment of loan of Rs.1,00,000/-. He contended that in all he had availed loan of Rs.12,000/- in different bits. He further contended that as the plaintiff was literate and as he was illiterate, in the guise of getting him old age pension sanctioned, obtained his signature on many papers and misusing that plaintiff has concocted Ex.P1. According to the defendant, some differences arose between him and the plaintiff regarding the repayment of Rs.12,000/-, in the panchayath convened at the instance of the parties, it was decided that RSA No.2004/2015 the defendant should pay Rs.25,000/-, the plaintiff declined that offer. The defendant further contended that there was ill-will between the plaintiff and his brother i.e, defendants son-in-law, therefore, the plaintiff has concocted Ex.P1 and laying false claim to the land which is being cultivated by his brother.
4. On the basis of such pleadings, the Trial Court framed the following issues: (1) Whether the plaintiff proves that on 8-8-2007 the defendant borrowed a sum of Rs.1,00,000/- from the plaintiff by executing Adharapathra? (2) Whether the plaintiff proves that defendant agreed to pay interest at 1.5% per month? (3) Whether the plaintiff is entitled for the reliefs as prayed? (4) What order or Decree?
5. In support of the case of the plaintiff, he got examined himself as PW1 and two witness PW2 and PW3 RSA No.2004/2015 and got marked Ex.P1 to Ex.P3. On defendants side DW1 to DW3 were examined and no documentary evidence was adduced.
6. The Trial Court after hearing both the sides, dismissed the suit holding that the execution of Ex.P1 by the defendant is not proved. It was further held that Ex.P1 which creates interest in the property, required registration as per Section 17(1)(b) of the Registration Act, 1908 and that was insufficiently stamped, therefore, inadmissible in evidence.
7. The plaintiff challenged the same before the First Appellate Court in R.A.No.668/2014.
8. The First Appellate Court on hearing the parties, by the impugned judgment and decree reversed the judgment and decree of the Trial Court and decreed the suit on the following grounds:
1) While rejecting the reception of Ex.P1 in evidence applying Section 34 of the Karnataka Stamp Act, 1957, the trial court ignored the fact that plaintiff RSA No.2004/2015 had paid the duty and penalty on the said document at the initial stage of the suit only.
2) Ex.P1 was only a document executed for security of loan and no right was created in the property under that document. Therefore, Section 17(1)(b) of the Registration Act is not applicable.
3) Evidence of PW-1 regarding execution of Ex.P1 was corroborated by evidence of PWs-2 and 3.
9. This Court admitted the appeal for consideration of the following substantial questions of law:
1. Whether the lower Court is justified in reversing the judgment and decree of the Trial Court holding that Ex.P.1-the mortgage deed in respect of movable property is not required for registration, when the property is worth more than Rs.100/- in view of the Section 17 of the Registration Act?
2. Whether the lower Court is justified in reversing the judgment and decree of the Trial Court without considering both oral and documentary evidence on record?
3. Whether the lower Court is justified in reversing the judgment and decree of the RSA No.2004/2015 Trial Court in the facts and circumstances of the case?
10. Sri K. Vijaya Kumar, the learned counsel for the appellant submits that Ex.P1 itself settles the terms of the contract and purportedly creates right to the plaintiff in the land, therefore the said document attracts Section 58(a) and (b) of the Transfer of Property Act, 1882 and the First Appellate Court has wrongly invoked Section 58(f) of the Transfer of Property Act. He further submits that document Ex.P1 involves uninitialled interpolations, therefore, the said document was not acceptable in evidence. He submits that even the oral evidence of the plaintiff and his witness smacks doubts.
11. The whole question is whether Ex.P1 is admissible in law. Ex.P1 purports to be a security document. According to the plaintiff himself, the defendant borrowed loan of Rs.1,00,000/- executing Ex.P1 and offering his land in Survey No.28 of Machanayakanahalli RSA No.2004/2015 Village, H. D. Kote, measuring 2 acres 6 guntas as security for the loan.
12. The records of the Trial Court show that Ex.P1 was marked subject to the objection regarding its admissibility. The First Appellate Court proceeded on the premise that Ex.P1 is a mortgage by deposit of title deeds and falls under Section 58(f) of the Transfer of Property Act. The First Appellate Court further held that Section 59 of the Transfer of Property Act exempts registration of document of mortgage by deposit of title deeds.
13. To be a mortgage by deposit of title deeds covered under Section 58(f) of the Transfer of Property Act, firstly there must be deposit of the title deeds of the property by the mortgager with the mortgagee. It is not the case of the plaintiff that any title deeds relating to the property mentioned in EX.P1 were deposited with him. He did not produce any title records of the said land. He did not even produce the revenue records pertaining to the said property. Therefore, the Trial Court held that it is not RSA No.2004/2015 mortgage by deposit of title deeds. In such circumstances, the First Appellate Court was not right in holding that the document Ex.P1 is a mortgage by deposit of title deeds and in applying Section 58(f) and 59 of the Transfer of Property Act.
14. The Honble Supreme Court in the STATE OF HARYANA AND OTHERS v. NAVIR SINGH AND ANOTHER (2013 AIR SCW 6251) has held that after the deposit of the title deeds, the creditor and the borrower may record the transaction in a memorandum and such a memorandum would not be an instrument of mortgage. A memorandum reducing the terms and conditions of contract coupled with the deposit in the form of a document, however shall require registration under Section 17(1)(c) of the Registration Act. Therefore, the finding of the First Appellate Court that the document was a memorandum of mortgage by deposit of title deeds and therefore was exempted under Section 59 of the Transfer of Property Act from registration, is erroneous. RSA No.2004/2015
15. If once Ex.P1 is excluded from evidence, the plaintiffs claim for recovery of Rs.1,40,450/- with interest at the rate of 1.5% per month thereon, fails. Under such circumstances, this Court does not find it necessary to delve upon the other contentions regarding fraud, misrepresentation, etc.
16. However, as per Section 58 of the Evidence Act, facts admitted need not be proved. It was the case of the defendant all along that he had borrowed Rs.12,000/- in different bits and towards the repayment of those dues, a panchayath was convened and his liability was fixed at Rs.25,000/-. He specifically pleads that in the written statement.
17. Further, in the cross-examination of PW1, the defendant himself suggested that the defendant was liable to pay Rs.25,000/- and that there was no other liability. That Rs.25,000/- he did not pay all along. Therefore, the RSA No.2004/2015 plaintiff was entitled to a decree for Rs.25,000/- with interest thereon.
18. It is not even the case of the plaintiff that the loan was borrowed for any commercial purpose. Therefore, as per Section 34 of the Code of Civil Procedure, 1908, the plaintiff is entitled to interest on that amount at 6% p.a.
19. The substantial questions of law 1 to 3 are answered accordingly. The appeal is partly allowed. The judgment and decree of the First Appellate Court is modified as follows:
(i) The suit of the plaintiff is decreed in part.
(ii) The plaintiff is entitled to recovery of Rs.25,000/- with interest thereon at 6% p.a. from the date of suit till its realization.
(iii) The plaintiff is entitled to proportionate cost.
(iv) Draw the decree accordingly. Sd/- JUDGE