This article is an outcome of my considerable hard work if not to say the product of the reflective thinking to make it handy to the legal field not confined but being more useful to the legal profession as a sharpening tool on law of mortgages. This article gives a comprehensive picture right from basics to principles and precedents relating to law on mortgages. I hope that it is useful to advocates, law students and judicial officers while dealing with mortgage suits.
The suits relating to mortgages stand for the principle “once a mortgage, always a mortgage“, meaning a borrower cannot contract to give up his automatic right to redeem title to his property once the debt is paid.The Transfer of Property Act, 1882 deals with the mortgage of immovable property in our country. Mortgage is the transfer of an interest in an immovable property for the purpose of securing a loan or the performance of an engagement. A mortgage to be valid must be in relation to payment of any definite amount either already advanced or to be advanced, by way of loan. This was observed in Sita Bai Vs. South Indian Bank Ltd., Trichur, Kerala State and others, 2013 (5) ALT 430 ( D.B.). A personal decree passed under Order 34 Rule 6 is a decree within the meaning of the definition in Sec. 2 (2). Under Sec. 48, the terminus quo is the date of the decree. An execution application filed within 12 years of the passing of a personal decree under 0. 34 R. 6 is within time. – Adabala Satyanarayana Vs. Damisetty Nagaraju and others, 1955 (1) ALT 389 ( D.B.).
Who are necessary and properties in a mortgage suit?:- (1) The provisions or Or. 1 R. 10 (2) C. P. C. as held by the Supreme Court in Kaziu Begum’s case (A. I. R. 1958 S. C. 886), should be construed very liberally and all persons who are found to have direct interest in the mortgaged properties must be held to be proper, though not necessary, parties for a complete and effective adjudication of the rights of the parties. (2) The object of the Legislature in making rule 1 to Order 34 C.P.C. is to define the scope of a mortgage suit, pure and simple. (3) The provisions of 0. 34, R. 1 C.P.C. are subject to the provision; of Or. 1 R, 10(2), but the provisions of Or. 1 R. 10(2), are not controlled by Or. 1 R. 3 C.P.C. (4) The question as to who are all the necessary parties to be impleaded as party defendants in a suit on mortgage is not one of jurisdiction but at most one of misjoinder or non-joinder of parties. (5) Where a suit for redemption, fore-closure or sale of mortgaged property is brought by the respective parties to the mortgage, all persons interested in the equity of redemption and all those who claim right and interest through the mortgagee should ordinarily be necessary parties, and the persons who claim adverse title paramount in some or all of the mortgaged properties but no through the mortgagor or mortgage, need not be implead as parties normally to such a suit. (6) But, the aforesaid rule is not inflexible or absolute and the court, in each case, has to see whether such a course will lead to inconvenience or confusion and exercise its discretion judiciously and properly. (7) In certain cases, where the court thinks it just, proper and necessary in the interests of all parties to adjudicate on the questions relating to paramount title, it is not only proper but even desirable to implead such parties and avoid multiplicity of litigation. (8) Where it is alleged that the person claiming adversely or by title paramount is a benamidar of the mortgagee, or is claiming to be in possession and enjoyment of all or some or the mortgaged properties, those who are likely to resist the decree-holder in case the decree is passed in terms of the plaint, must be held to be proper, though not necessary, parties to such a suit on mortgage. (9) Where the court, on a consideration of the facts and circumstances of each case, is of the opinion that it would be just and convenient and desirable to decide the title of the persons who set up a paramount title, then those persons must be impleaded as party defendants, and in the interests of all parties the question of title also should be adjudicated upon after framing appropriate and proper issues and giving opportunity to all the parties concerned. – R. Veeraswamy Vs. R. Jangamayya – 1969 (2) ALT(NRC) 12. KONDAIAH,j
An application under Sec. 19 A (1) of Madras Agriculturists Relief Act (IV of 1938) has power to decide all questions arising between the mortgagee and the mortgagor:- A court deciding an application under Sec. 19 A (1) has power to decide all questions arising between the mortgagee and the mortgagor as well as other’ owners of the equity of redemption, as in a regular mortgage suit. If the mortgagee does not relinquish his security, the court would have to pass a mortgage’, decree under Sub-section (5) of Sec. 19-A. Appeal dismissed. – Kotipalli Thammayya and others Vs. Mattapalli Raju and others – 1955 (1) ALT(NRC) 111.1 ( D.B. ). N.D. KRISHNA RAO and VISWANATHA SASTRY,jj.
Second suit for mortgage not barred either on principle of res judicata or under Order 2 Rule 2 CPC.:- Till mortgage debt is discharged and rights are determined by parties or by Court decree, any number of suits can be filed, subject to period of limitation. – Gummuluru Sansyasinaidu and others v. State Bank of India, rep. by the Manager, Narsipatnam – 2011 (3) ALT 731. N.R.L. NAGESWARA RAO,j.
Even if E.P. is not filed in execution of earlier decree or if it is time barred- second suit maintainable:– Even if E.P. is not filed in execution of earlier decree or if it is time barred, still second suit maintainable – Second suit not barred either on principle of res judicata or under Order 2 Rule 2 CPC. – Gummuluru Sansyasinaidu and others v. State Bank of India, rep. by the Manager, Narsipatnam – 2011 (3) ALT 731. N.R.L. NAGESWARA RAO,j.
Execution of preliminary decree:- Preliminary decree in a mortgage suit is not executable in the absence of a final decree obtained in the suit. (Para 85). – Lanka Babu Surendra Mohana Benarji Vs. Canara Bank, Unguturu and another – 2015 (6) ALT 473. M.S. RAMACHANDRA RAO,j.
Preliminary decree- Not Executable:- Execution petition for execution of preliminary decree in mortgage suit is not maintainable – What is executable is only final decree.(Para 5). – K. Anuradha Vs. Ramadevi and another – 2012 (4) ALT 410. C.V. NAGARJUNA REDDY,j.
Specific performance of an agreement to mortgage:- Specific performance of an agreement to mortgage is different from relief for redemption of mortgage as such. – Booz Allen and Hamilton Inc Vs. SBI Home Finance Ltd. and others – 2011 (4) SCJ 604 ( D.B. ). J.M. PANCHAL and R.V. RAVEENDRAN,jj.
Preliminary decree/final decree:- In cases where there is a prior charge or mortgage before suit is filed, the case falls under Order 34 Rule 15 (1), CPC and the properties charged or mortgaged cannot be brought to sale without a final decree Order 34 Rule 15 (2), CPC covers a situation where a charge is created for the first time under the decree and it permits the property charged to be brought to sale in execution of a preliminary decree without a final decree. (Paras 60 and 64). – Lanka Babu Surendra Mohana Benarji Vs. Canara Bank, Unguturu and another, 2015 (6) ALT 473 . M.S. RAMACHANDRA RAO,j.
Right of redemption:- Till the passing of final decree and even till the confirmation of the sale made in pursuance of the final decree or the disposal of any appeal against orders passed under Order 21 Rule 89 or 90, CPC, a right to redeem continues to subsist in the mortgagor. (Para 50). – Lanka Babu Surendra Mohana Benarji Vs. Canara Bank, Unguturu and another, 2015 (6) ALT 473 . M.S. RAMACHANDRA RAO,j.
No Claim petition:- No claim petition under Section 47 or under Order 21 Rule 58, CPC would be maintainable in an execution taken out in a suit based on a mortgage. (Para 39). – Indian Bank, Nidadavole, rep. by its Zonal Manager Vs. Nallam Veera Swamy and others – 2014 (5) ALT 631. NOOTY RAMAMOHANA RAO,j.
Appeal against preliminary decree:- In a mortgage suit, appeal filed against suit claim to the extent disallowed in the preliminary decree passed cannot be said to be not maintainable on the ground that a final decree application was made in respect of suit claim allowed in the preliminary decree and that it was allowed pending appeal. (Para 8). – State Bank of India, Settipalle Branch, Tirupati rep. by its Chief Manager Vs. P. Veeranarayana – 2014 (1) ALT 714. VILAS V. AFZULPURKAR,j.
Interest:- Civil court has discretion under Order 34 Rule 11, CPC to reduce the contractual rate of interest depending upon the facts and circumstances of each case in spite of the provision of Section 21-A of Banking Regulation Act providing for charging compound interest at contractual rate. (Paras 23 and 24). – State Bank of India, Settipalle Branch, Tirupati rep. by its Chief Manager Vs. P. Veeranarayana – 2014 (1) ALT 714. VILAS V. AFZULPURKAR,j.
Interest in mortgage suit:- In mortgage suits, court has discretion in the matter of grant of interest pendent lite and subsequent interest – It is not absolutely obligatory on court to decree interest at contractual rate upto date of redemption. – Dara Namassivaya and other V. Smt. Veturi Ratnalamma – 2005 (6) ALT 118. P.S. NARAYANA,j.
Doctrine of lis pendens in mortgage suit:- Doctrine of lis pendens applies to mortgage suits as well. – Sunita Jugalkishore Gilda Vs. Ramanlal Udhoji Tanna (Dead) thr. Lrs. and others – 2014 (1) ALT(SC) 15 ( D.B. ). K.S. Radhakrishnan and Arjan Kumar Sikri,jj
Rate of interest:- The very purpose of the enactment of Usurious Loans Act is to ensure that the persons in need of money are not exploited by the lenders – The reasonableness of the rate of interest mentioned in the contract falls within the realm of adjudication by Court on the touchstone of settled principles.(Paras 10 and 11). – Investment Trust of India Limited, Chennai Vs. P.Varahalamma and another – 2013 (6) ALT 212 ( D.B. ). L. NARASIMHA REDDY and S.V. BHATT,jj.
Sale in mortgage suit:- J.Dr. in mortgage suit can seek annulment of sale by depositing the amounts as stipulated in Order 34 Rule 5, CPC at any stage before confirmation of sale.(Para 10). – Patnam Subbalakshmamma v. Sunkugari Sreenivasa Reddy and another – 2011 (3) ALT 591. L. NARASIMHA REDDY,j.
Period of limitation:- When an appeal is filed against preliminary decree in mortgage suit, period of limitation to file application for passing final decree begins to run from the date of appellate decree and not from the date of preliminary decree even though no stay application was filed in appeal.(Paras 8 and 9). – Bank of India rep. by its Branch Manger, Dommeru v. Pothula Veera Krishna Rao and others – 2010 (5) ALT 534. P.S. NARAYANA,j.
Execution of mortgage final decree:- A decreeholder in a mortgage suit has to proceed against mortgaged property and then to resort to other steps, in case the sale does not result in satisfaction of decree.(Para 6). – P. Ravinder v. Manohar Reddy – 2010 (1) ALT 365. L. NARASIMHA REDDY,j.
Mortgage decree against company:- Where the J.Dr. in a mortgage decree is a company, E.P. be filed against company itself. Filing of EP against Managing Director of Company straightaway is not just.(Para 5). – P. Ravinder v. Manohar Reddy – 2010 (1) ALT 365. L. NARASIMHA REDDY,j.
Final decree in partition suit is different from the final decree in mortgage suit:- 1. A preliminary decree in a mortgage suit decides all the issues and what is left out is only the action to be taken in the event of non payment of the amount. When the amount is not paid the plaintiff gets a right to seek a final decree for foreclosure or for sale. 2. In a partition suit the preliminary decrees only decide a part of the suit and therefore an application for passing a final decree is only an application in a pending suit, seeking further progress. In partition suits, there can be a preliminary decree followed by a final decree, or there can be a decree which is a combination of preliminary decree and final decree or there can be merely a single decree with certain further steps to be taken by the court. In fact several applications for final decree are permissible in a partition suit. A decree in a partition suit enures to the benefit of all the co-owners and therefore, it is sometimes said that there is really no judgment-debtor in a partition decree. A preliminary decree for partition only identifies the properties to be subjected to partition, defines and declares the shares/rights of the parties. That part of the prayer relating to actual division by metes and bounds and allotment is left for being completed under the final decree proceedings. Thus the application for final decree as and when made is considered to be an application in a pending suit for granting the relief of division by metes and bounds. – Shub Karan Bubna @ Shub Karan Prasad Bubna Vs. Sita Saran Bubna and others – 2009 (8) SCJ 281 ( D.B. ) R.V. RAVEENDRAN and B. SUDERSHAN REDDY,jj.
Revision petition filed challenging the order passed on application made for passing final decree :- Application to pass final decree for sale of mortgaged property in terms of preliminary decree filed. Final decree passed. Execution proceedings initiated – Revision petition filed challenging the order passed on application made for passing final decree. Not maintainable. – Kommuru Bhaskararao and another Petitioners (R-4 and R-5). vs.Aremanda Sivanagendramma Respondent (Plaintiff-Petitioner). – 1996 (4) ALT 915. D.H. NASIR,j.
Limitation to file final decree in mortgage suit:- Preliminary decree passed granting instalments to pay decretal amount – Right to apply for final decree accrues from the date of default in payment of any instalment – Limitation period of three years starts from the date of default. – Manotosh Kumar Mitra (dead) by LRs. Vs. Amarendranath Shaw (dead) and others –2000 (2) ALT(SC) 29 ( D.B. ) Y.K. SABHARWAL and S. SAGHIR AHMAD,jj.
Usufructuary mortgage:- Suit for possession of land by redemption – Claim by heirs of mortgagor not traceable. Whether acceptable. Mortgagor not traceable or heard of for the last more than seven years before institution of suit – Mortgagee not able to establish his plea that mortgagor was alive. Evidence of plaintiffs’ witnesses accepted by trial Court. Rejection of their evidence by appellate Court held to be wholly unfounded and unjustifiable. Decree passed by trial Court upheld. – Rati Ram and another Vs. Salig Ram – 1996 (1) ALT(D.N.) 3.3 ( D.B. ). FAIZAN UDDIN and S.C. SEN,jj
Mortgage by deposit of title deeds:- Deeds may be delivered as security for a debt. Contract between debtor and creditor need not be by a written document. Intention to created security is a question of fact to be decided on presumptions and on oral, documentary and circumstantial evidence. Defendant delivered title deeds as security for repayment of amounts due under promissory notes. Order of lower Court directing office to register the suit as simple money suit instead of registering it as mortgage suit by deposit of title deeds. Not legal and unjustified. Whether there was intention to create security while delivering title deeds is a matter to be decided on evidence after registering the suit and not at the stage of registering it. – Shaik Mastanamma Vs. Kadiyala Gopalaiah – 1993 (3) ALT 617. BHASKARA RAO,j.
A suit cannot be dismissed except on appeal or by review after a preliminary decree is passed.:- It follows that there cannot be abatement of the suit even if the L.Rs of the deceased party are not brought on record during the final decree proceedings. But, even a final decree cannot be passed for or against a dead person. So, it is necessary to bring on record the L.Rs. of the deceased before a final decree is passed. It has to be seen as to what provision is applicable when Or. 22 Rules 1, 3 and 4 are not applicable in case of death of parties during the final decree proceedings. – Siddavatam Mohan Reddy Vs. P. Chinnaswamy And Ors – 1991 (3) ALT 513. NEELADRI RAO,j
Applicability of Order 22 Rule 10 C.P.C:- Order 22 Rule 10 C.P.C lays down that in cases of an assignment, creation or devolution of any interest other than the cases referred to in remaining Rules of Or. 22, the suit may by leave of the Court, be continued by or against the person to or upon whom such interest has come or devolved. When Or. 22 Rules 3 or 4 is not applicable in cases of death during the final decree proceedings, one has to invoke Or. 22 Rule 10 C.P.C. to bring the L.Rs. on record. (Para 7). – Siddavatam Mohan Reddy Vs. P. Chinnaswamy And Ors – 1991 (3) ALT 513. NEELADRI RAO,j
Or. 34, Rules 3 and 4:- Preliminary decree in a mortgage suit for sale of land belonging to mortgagor. Final decree passed for delivery of possession of land to mortgagee. Not legal. – Nagamma Vs. S.P. Manipal Reddy – 1990 (2) ALT(NRC) 21.2. J. ESWARA PRASAD,j.
No bar To record payments under a preliminary decree in a mortgage suit:- Application by judgment-debtor to record payments under a preliminary decree in a mortgage suit. No execution petition pending. Not a bar to maintainability of application under Or.21, Rule 2. Right to apply under Or. 34, Rule 3 (I) for passing a final decree. Also not a bar to entertain application, under Order 21 Rule 2. – Messrs Sri Laksbminartiyana Sago Manufacturing Co. rep. by its Partner Chintapalli Ramakrishna and another Vs. State Bank of India, Samalkota – 1988 (1) ALT 837. SYED SHAH MOHAMMED QUADRI,j.
Death of plaintiff in mortgage suit:- Held – Under Order 1, Rule 10 C.P.C., in order to effectually dispose of the suit, it is necessary to bring the legal representatives on record. (para 2). – Kuragayala Savithri and others Vs. Konduri Chinnayyamma and others –1988 (1) ALT 528. A. SEETHARAM REDDI,j.
Limitation Act not applicable to Or 34, Rule 5:- Sale of mortgaged property not confirmed till judgment debtor filed application an under Or. 34, Rule 5 for setting aside sale and for depositing amounts due to auction purchaser-Court can allow petition of judgment debtor-Limitation Act not applicable to Or 34, Rule 5. – S. Subba Rao Vs. B. Suryaprakasa Rao – 1988 (1) ALT(NRC) 33.1. P.A. CHOUDARY,j.
Prior mortgage- Burden of proof :- Decree passed in a mortgage suit and sale of hypothec of the mortgagor-Subsequent suit filed by the son-in-law of mortgagor setting up prior mortgage. Burden of proof lies on the prior mortgagee. – D. Pera Reddy Vs. D. Kondareddy and others –1985 (1) ALT(NRC) 75.2. P.A. CHOUDARY,j.
Hindu son- Not a mortgage suit :- A Hindu son is bound by the court sale of properties mortgaged by his father though he is not a party to the mortgage suit. – V. Narasimhulu Vs. V. Ramaiah & another – 1978 (2) ALT 435. A. GANGADHARA RAO,j.
Conclusion:- A mortgagor is a borrower in the mortgage. Mortgagor owes the obligation secured by the mortgage. The borrower must meet the conditions of the underlying loan or other obligation in order to redeem the mortgage. If the mortgagor fails to meet these conditions, the mortgagee may foreclose to recover the outstanding loan. As to ‘ Once a mortgage, always mortgage’, as was observed by Lord Henley in Vernon Vs. Bethel that_ “This court as a conscience is very jealous of persons taking securities for a loan and converting such securities into purchases and therefore I take it to be an established rule, that a mortgagee can never provide at the time of making the loan for any event or condition on which the equity of redemption shall be discharged and the conveyance made absolute and there is great reason and justice in this rule for necessitous men or not will submit to any terms that the crafty may impose upon them.” The equity of redemption has been well recognized in common law as well as in the Transfer of Property Act, 1882 which explicitly substantiate this principle. There may be various conditions whereby the stipulations in the mortgage-deed have turned to be the clog on the equity of redemption. The equity of redemption can be brought to an end either by the act of parties or by a decree of the court. The sale, exchange, mortgage are the alienations as defined within the meaning of the provisions of the Transfer of Property Act, 1882. The sale and exchange are absolute alienations, but the mortgage is condition alienation. As long as the mortgage amount is not discharged, the mortgagee has got a right over the mortgaged property and insofar as mortgage amount the right of mortgager is only to redeem the mortgaged amount.