c KIDAR NATH v. MANGAT RAI & ORS. October 31, 1969 [J. C. SHAH AND K. S. HEGDE, JJ.) Transfer of Property Act (4 of 1882)·, s. 58 (!), anomalous mortgage, U'hat is. Punjab Relief of Indebtedness Act, 1934, s. 30.-Whether legal re- presentatives of debtor entitled to apply for relief-Scope of. _ Usurious L0<;ns Act, 1918, ss. 2(3)(a) (b) and (c) ands, 3(2)(e)- Scope of.
In a suit for redemption of a mortgage with possession under a mort· gage deed of 1896, the Court declared the amount due on the mortgages. No payment was made undeir the decree by the mortgagor.
Instead, on his death, his replresentatives applied for relief under s. 30 of the Punjab Relief of Indebtedness Act, 1934 and the Usurious Loans Act, 1918. as amended by the East Punjab Amendment Act, 1948. The applicants were given relief by the High Court and the representatives of the mortgagee appealed to this Court.
HELD: (I) Under the covenants in the mortgage deed. there is a stipulated rate of interest payable by the mortgagor, and the amount te· covered from the income was to be first applied towards interest and the bala~ce towards principal.
It was an anomalous mortgage and not a usufructuary mortgage. The liability of the mortgagor to pay the money due under the mortgage and to pay interest accruing due creates a debt, even if it be assumed that the mortgagee had no right to enforce the mortgage by sale but only had a right of foreclosure. [217 H, 218 C] (2) The obligation is enfo<ceable against the estate of the debtor in the hands of his legal representatives.
When it is so sOught to be en- forced, in the absence of an express provision to the contrary, the re· presentatives may set up the defence which the original debtor could, if he had been sued.
There is no' warrant, therefore, for the contention that the jurisdiction of the court under s. 30 . of the Punjab Relief of Indebtedness Act, is attracted only when the original debtor is the appli- cant and not on the
application of his legal representatives. [218 H; 219 Al ( 3) The legal representatives were not entitled to claim the benefit of the Usu'rious·Loails Act, 1918. Section 2(3) (a) and (b) do not apply to a suit for redemption by the mortgagor and cl. ( c) only applies in those cases where the security is given after the commencement of the Usurious Loans Act. [219 G]
( 4) The legal representatives were entitled to the benefit of the Punjab Relief of Indebtedness Act. . The application of s. 30 of the Act does !lot depend upon the suit being one to which the Usurious Loans Act •PP!tes. Even if the suit is not within the definition in s. 2(3) of the Usunous Loans Act by virtue of s. 30 of the Punjab Relief of In,\!ebtedness A7t, the amount receiyed by a creditor in excess. of. the amount due to him under s. 3(2)(e) of the Usurious Loans Act" liable to be deducted from twice the amount actually advanced. [220 El
[ 1970]3 S.C.R. ( 5) Section 30 uses the expressiort "sum found by the court to hav.:: been ·actually advanced.' Such amount is not the amount found by the court to be the amount due on taking account.
Therefore, the amount declared by the court as the amount due cannot be deemed to be the amount actually advancedi and under s. 30, the court cannot declare any amount due under the n1o'rtgage which is in excess of twice the amount actually advanced less any amount received in excess of the amount due to the creditor under s. 3(2)(<) the Usurious Loans Act. [220 H] CIVIL APPELLATE JURISDICTION : Civil Appeals Nos.· 10 and
11 o.f 1966. Appeals from the judgment and decree dated May 23, 1961 of the Punjab High Court in Regular First Appeals Nos. 184 of 1954 and 6 of 1955. C. B. Agarwala and A. D. Mathur, for the appellant (in both the appeals).
K. L. Gosain, N. N. Goswami and P. C. Khanna. for respon- dents Nos. 1 to 4 (i·n C.A. No. 10 of 1966) and respondents Nos. 1 to 6 (in S.A. No. 11 of 1966). .B. Datta, for respondent No. 18 (in C.A. No. 10 of 1966) and respondent No. 24 (in C.A. No. 11 of 1966).
The Judgment of the Court was delivered by Shah, J.-On July 20,. 1896, L11dhia-grandfather of the respondents-borrowed Rs. 5,000 from Ramji Dass and as security for repayment thereof mortgaged with possession certain agricul- tural lands and a house.
The mortgage amount was to carry interest at the rate of 12 annas per cent. per mensem, and in default of payment of interest due at the. end of the year interest was chargeable at 1 % per mens"em.
On May 17, 1897, Ladhia exe- cuted in favour of Ramji Dass another mortgage deed on the same properties for Rs. 800. Interest under that mortgage was payable at the rate of 2 % per mensem. Ladhia executed a third mortgage deed in favour of Ramji Dass on May 21, 1897, for Rs. 600. It
included the properties in the two earlier mortgages and 1/12th share in other lands and two houses. The properties mortgaged in favour of Ramji Dass were subject to a previous mortgage in favour of one Shugan Chand.
Ramji Dass redeemed that mort- gage on payment of Rs. 650. Lekh Ram son of Ladhla filed a suit for redemption of the three mortgages. On August 21, 1915, a preliminary mortgage decree was passed in the suit by the Subordinate Judge, Hissar, declaring that Rs. 62,293/11/9 were due on the mortgages. The High Court of Punjab confirmed the decree on November 24.
1919. But no payment was made under that decree, nor was the decree made final. c A Division Bench of the High Court then held that under the principle of s. 30 of the Punjab Relief of Indebtedness Act, the mortgagee's representatives were entitled to receive Rs. 14,100, being double the amount due as mortgage debt, and Rs. 1,420, being double the amount of improvements made by the mort-
gagee. and the total amount received by the mortgagee as income from the properties was Rs. 45,022, and deducting therefrom Rs. 35,810 being the amount received in excess, the balance of Rs. 9.212 remained.
A decree for redemption on payment ot Rs. 6,308 (Rs. 15,520 less Rs. 9,212) was accordingly passed. Against the decree passed by the High Court, these appeals have been preferred by the re£resentatives of the mortgagee with certificate granted by the High Court.
Three questions are raised in these appeals : ( 1) That s. ·30 of the Punjab Relief of Indebtedness A.ct, 1934 has no application, because- ( a) there-is no debt due; and c ( b) that a legal representative of the original mort-
gagor cannot obtain the benefit of s. 30; ( 2) That the judgment of the Division Bench is ;nconsistent with the finding on the second question cecorded by the Full Bench; and (3) That the amount declared as due under the
preliminary decree in the earlier suit was for the pur- poses of s. 30 of the Punjab Relief of Indebtedness Act the "amount actually advanced". It is urged that s. 30 of the Punjab Relief of Indebtedness Act. 1934, had no application, for the three mortgages being usufructuary mortgages there is no debt due by the mortgagor, nor can the mortgagee enforce recovery of any debt under the• coYenants of the mortgagees.
The first mortgage Ext. P-1 dated July 20, 1896 recited that the mortgagor Ladhia had mortgaj!ed with possession the properties set out therein for Rs. 5,000. The mortgage deed contained the following, amongst other, cove- nants:
"First :-Interest on the mortgage money has been fixed at Re. -/12/- per cent. per mensem. Third :-I will be entitled to get from the mort- gagee the income accruing from the mortgaged pro-
perty aftet deduction of the Government revenues -therefrom. Fourth :-I will pay back the principal mortgage money within a period of six years. In case of default c K!DAR NATH V. MANGAT RAJ (Shah, J.)
~15 Some time in 1951 the representatives oi Ladhia applied under the Punjab Restitution of Mortgaged Lands Act, 1938, to the Special Collector and obtained an order for restoration of the agricultural lands.
Thereafter the mortgages remained outstand- ing only on non-agricultural properties. The representatives of Ladhia then instituted an action in the Court of the Senior Sub- ordinate Judge, Hissar, for redemption of the non-agricultural properties, and claimed an account under s. 30 of the Punjab Relief of Indebtedness Act, 1934, and also oi Usurious Loans Act, 1918. as amended by the East Punjab Amendment Act 4 of 1948. The representatives of the mortgagee contended, inter alia, that the suit was barred because no payment was made pursuant to the preliminary decree in the earlier suit, that in any event it was declared that the amount due in 1919 under the three mortgages was Rs. 62,293/11/9, and that decision operated as res judicata. and that account under s. 30 of the Punjab Relief of Indebtedness Act should be taken on that footit1g.
The Trial Court held that the mortgage dues were R>. 7,050; that the mortgagee had received Rs. 48,571 as income durin~ the time he and his representatives remained in possession of the mortgaged properties; that the preliminary decree in the earlier suit declaring that Rs. 62,293/11/9 were due
operated as res judicata; and that the present action not being one for recovery of a Joan, the rule of Damdupat incorporated in s. 30 of the Punjab Relief of Indebtedness Act, 1934 had no application; buts. 2 of the Usurious Loans Act, 1918, as amended by the East Punjab Act 4 of 1948 applied.
The Court held that the mortgagee was entitld, besides Rs. 62,293/ 11/9 to Rs. 17 ,855/ 4/3 as interest on the three mortgages aD'.l after giving credit for Rs. 48,571 received as income, the balance due was Rs. 31,578.
The Trial Court accordingly passed a decree for redemption of the properties in ~it on payment of Rs. 31,578. In the appeal filed by the parties to the High Court of Punjab. two questions were referred to a Full Bench :-
"1. Whether it is open to the legal representatives of a debtor to invoke the help of s. 30 of the Punjab Relief of Indebtedness Act in a suit for possession by redemption ? 2. Whether the provisions contained in s. 3 of the
Usurious Loans Act, 1918, as amended in the Punjab, would govern a suit for redemption of mortgage exe- cuted before the commencement of the Act ?" The Full Bench answered the first question in the affirmative, and the second. in the negative.
c KIDAR NATH V. MANGAT RAI (Shah, /.) of payment of the whole or a part of it the mortgaged property shall be considered as foreclosed in· favour of the mortgagee, ……. . Fifth :-1 will pay the interest year after year.
In case of default I will pay interest on the amount of interest also at the rate of Re. 1/- per cent. per mensem. The mortgagee shall also be competent to file a sepa- rate suit regarding the amount of interest in Civil Court
and recover the same from me through it. I shall not have any objection thereto. Seventh :-Till the principal mortgage money and the interest are not paid off in full. temporary or per-
manent transfer of the mortgaged property by me to any body else shall be considered illegal and invalid .. The mortgage deed Ext. P-2 dated May 17, 1897, for Rs. 800 contained similar covenants.-
It also recited that an amount of Rs. 5,000 was borrowed under a deed dated July 20, 1896, and the mortgagor agree<:! to repay the sum within six years with interest at the rate of Re. -/ 12/- per cent. per mensem.
By the sixth clause it was provided : "In case of default, viz., in default of payment of the mortgage-money and interest along with the previous mortgage money amounting to Rs. 5,000/-
(on the basis of the mortgage-deed) dated the 20th of July, ·1896, agreed !o be paid back within a period of six years, the surplus rights in the mortgaged property shal! be considered as foreclosed and shall be the absolute
property of the mortgagee. . . . . . " Exhibit P-3 dated May 21, 1897. aim referred to the two earlier mortgages. By the first clause it recited that the mortgage Money shall be paid back alongwith the mortgage money due
under the two earlier deeds of mortgage. The second clau~e referred to the interest payable on the mortgage money at the rate of Rs. 2/- per cent. per mensem. The sixth clause recited that
till the entire mortgage money and intereot arc not pai:I off, the mortgagor will not transfer by sale, mortgage or gift the mortgageJ property to any body else. The .seventh clause provides that the
money paid by the mortgagor shall first be credited towards the interest on the two earlier mortgages and the balance shall be accounted towards the principal. By the eighth clause it was provid.~ that the mortgagor will pay interest on the mortgage money upto the date of redemption of the mortgaged property. Under the cove11ants in each of the deeds of mortgage, there is a stipulated rate of interest payable by the m0rtgagor on the L6SupCl/70-15
21S (1970] 3 s.c.R. mortgage money and the amount recollered fn;>n1 the income is io be first applied towards the interest and the balance towards the principal. The mortgagee is also entitl)'d 10 recover
by. suit interest accruing due. The niortgages are clearly anomalous 111ortgages. Section 7 of the Punjab Relief o{ Indebtedness Act. I 934. detincs a 'debt' as inclusive cf ''all liabilities of a debtor in cash or in kind, secured or unse~1red. payable under a decree or order ot' a civil court or otherwise. whether mature or not, . . . . ·· Th~ definition of the expression 'debt' therefore includes all liabi- "lities of a debtor1 in cash or in kind, secured or unsecured. The
liability of a mortgagor to pay the money due, under the mortgage and to pay interest accruing due is clearly a debt. even if it be assumed that the mortgagee had no right to enforce the mortgage" – by sale .o.f the property and had a right only to foreclose the mort- gages.
Under the terms of the mortgage deeds. if the mortgagor pays the amount due. the mortgagee is bound to release the mort- gaged property. It cannot be said that u.nder the three mortgages there was no debt due by the mortgagor.
Nor do we agree with counsel for the mortgagee thai the benefit of s._ 30 of the Punjab Relief of fndebtedness Act is available only to the origim1l mort- gagor and not to his representatives.
Section 30 of the Punjab Relief of fndebtedness Act by the first sub-section provides : "Tn any suit brought after the co1nn1encen1ent cf th.is Act in respect of a debt as defined in section 7.
advanced before the commencement of this Act no court shall pass or execute a decree or give effect to an award in respect of sucfi debt for a larger sum than twice the amount of the sum found by the Court to
have been actually advanced, Jess any amount -already received by a creditor in excess of _the amount due to him under cl~use (e) of sub-s. (2) .of section 3 of the Usurious Loans Act. 1918."
.-\ >llit lo redeem property on payment of the amount due on the monguge is a suit in respect of a debt; anl:I the Court is bys. 30,of the Act debarred from passing a decree for a sum larger than twice the wnount of the ·sum found by the Court to have been actually advanced.
The section imposes a restriction, in certain condi- tions. upon the power of the Court. It is the nature of the suit which decides the Court's jurisdiction : the seciion makes no
reference to the status of the party claiming relief except in so far as the definition of debt involves such reference. On the plain words of the section there is no warrant for the view that the jurisdiction of the Court ;is attracted only when the person who incurred the obligqtion to. pay the debt personally is a party to the suit and not when his legal representatil;e is a party. An
c c KIDAR NATH v. MANGAT RA! (Shah, J.) 21 !I obligation to pay a debt is not extinguished on the death of the debtor. The obligation is enforceable against the estate of 'the debtor in the. hands of his legal representatives; and when it is so sought to be enforced, in the absence of an express provision or clear Jntendment to the contrary, the representatives may set up the defence which the original debtor could if he had been sued have set up. The representatives of the mortgagor were therefore rightly held entitled to the benefit of s. 30 cf the Punjab Relief of Indebtedness Act, 1934.
Each of the three mortgages created a debt due by the mort- gagor within the meaning of s. 7 of t)le Punjab Relief of Indeb- tedness Act, 1934, and a suit filed by the representatives of the mortgagor for redemption of the mortgages was a suit in respect of a debt within the meaning of that section.
A suit for redemp- tion of a mortgage executed before the commencement of the Usurious Loans Act, 1918, was however not a suit to which the Act applied, and on that account the mortgagor could not claim the benefit of that Act.
Section 2(3) of the Usurious Loans Act defines "suit to which this Act applies" as meaning any suit- " (a) for the recovery of a loan made whether before or after the commencement of this Act; or
(b) for the enforcement of any security taken or any agreement whether by way of settlement of account or otherwise made, after the com- mencement of this Act, in respect of any loan
made either before or after the commencement of this Act; or ( c) for the redemption of any security given after the commencement of this Act in respect of any loan made either before or after the commence-
ment of this Act." Evidently els. (a) and (b) of s. 2(3) have no application to a suit for redemption by the mortgagor, and cl. ( c) also will not apply because the security was given before the commencement of the Act.
Clause ( c) only applies in those cases of redemption of securities given after the commencement of the Act in respect of any loan made either before or after the commencement of the Act. . The mortgagor's representatives were, therefore, not entitlej to claim the benefit of the Usurious Loans Act, 1918.
The mortgagor's representatives were still entitled to the benefit of the Punjab Relief of Indebtedness Act. By s. 30( 1 l of that Act in a suit filed in respect cl a debt, the Court is enjoined not to pass a decree for a sum larger than twice the amount found by the Court to have been actually advanced, less any amount ~20
[ 1970 J 3 S.C.R. already recr-ived by a creditor in excess of the amount due to him under cl. (e) of sub-s. (2) of s. 3 of the Usurious Loans Act, 1918. Clause (e) of sub-s. (2) of s. 3 of the U8urious Loans Act was incorporated in that Act by s. 5 of the Punjab Relie.f of Indebtedness Act. The clause reads :
"The Court shall deem interest to be excessive if it exceeds seven and a half per centum per annum simple interest or is more than two per centum over the Bank rate, whichever is higher at the time of taking the Joan,
in the case of secured loans, or twelve and a half per centum per annum simple interest in the case of un- secured loans : Provided There is nothing in s. 30 of the Punjab Relief of Indebtedness Act which restricts the benefit of deduction oi amounts in excess of the amount due under cl. (e) of sub-s. (2) of s. 3 to those suits only to which the Usurious Loans Act applies.
The appli- cation of s. 30 of the Punjab Relief of Indebtedness Act does not depend upon the suit being one to which the Usurious Loans Act applies. Even if the suit is not within the definition in s. 2 ( 3) ' of the Usurious Loans Act, by virtue of the express provisions of s. 30 of the Punjab Relief of Indebtedness Act the amount receiv- ed by a creditor in excess of the amount due to him under cl. ( e) o.f sub-s. (2) of s. 3 of the Usurious Loans Act is liable to be deducted from twice the amount actually advanced.
The High Court was, therefore, right in directing that the amount received in excess of the amount due under cl. ( e) of sub-s. (2) of s. 3 of the Usurious Loans Act was liable to be deducted from twice the amount actually advanced.
Counsel for the mortgagee's representatives contended that the decision of the Civil Court in the earlier suit for redemption which declared an amount of Rs. 62,293/11/9 due under the mortgages must be deemed to be the amount actually advanced by the mori- gagee.
But the decree in the earlier suit merely declared the amount due at the date when the decree was passed : it did not adjudicate that the amount declared was the amount actually advanced under the
three mortgages. The amount advanced under a mortgage is not the amount found due on taking acc~unt of the mortgage. Section 30 uses the expression "sum found by the Court to have been actually advanced". If apart from the terms of the Punjab Relief of Indebtedness Act, the mortgagor was seeking an account of the mortgage dues, the previous adjudi- cation may be binding.
But the provisions of s. 30 of the Punjab Relief of Indebtedness Act places an embargo upon the Court ll c Ii KIDAR NATH v. MANGAT RAJ (Shah, /.) declaring any amount due under the mortgage which is in excess of twice the amount actually advanced less any amount received in excess of the amount due to the creditor under cl. ( e) of sub-s. (2) of s. 3 of the Usurious Loans Act.
The Court, therefor..,. could not pass an order directing payment of an amount larger than the amount which may be declared du~ under s. 30 of th~ Punjab Relief of Indebtedness Act.
The appeals fail and are dismissed with costs. One hearing fee. R.K.P.S. Appeals dismissed.