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Andhra Pradesh High Court
Judges : A.D.V.REDDY, C.KONDAIAH
Pentala Githavardhana Rao - Appellant
Versus
Andhra Bank Ltd. - Respondent
Decided On : 12-24-71
KONDAIAH, J. ( 1 ) THIS appeal by defendants 3 and 4 in O. S. No. 49 of 1964 on the file of the Court of the Subordinate Judge. Guntur is directed against the judgment and decree granted in favour of the Andhra Bank Ltd. , Guntur the 1st respondent herein, for recovery of Rs. 2,57,625. 47 paise from the defendants.
Fact of the Case:
The 2nd defendant the father of the defendants 3 and 4 opened various accounts such as open cash amount credit Key Cash Credit. Clean Overdraft Packing Credit and Secured Overdraft Account in the plaintiff-bank early in 1962 and was having credit facilities for carrying on his tobacco trade. He was receiving several amounts under various accounts creating security on goods on hand or on stocks reaching his godowns from day to day. Prior to opening the accounts in the plaintiff-bank he was having credit facilities from the Indian Bank Guntur wherefrom he had borrowed Rs. 75,000. 00 on an equitable mortgage by deposit of title deeds. According to the plaintiff-bank the 2nd defendant requested for a loan of Rs. 75,000. 00 for paying the same to the Indian Bank and created on equitable mortgage by deposit of title deeds as collateral security for due discharge of the then advanced money as well as the outstanding other dues under various accounts and such future advances as might be made by the plaintiff on such security. The amount of Rs. 75,000. 00 was paid by the plaintiff to the Indian Bank on 17-7-1962 as evidenced by Ex. A-21 and the voucher Ex. A-22. An equitable mortgage by deposit of title deeds was created in favour of the bank on 18-7-1962. Promissory notes also have been executed by the 2nd defendant in favour of the plaintiff in respect of the amounts borrowed on other accounts. The 2nd defendant was adjudged insolvent on 28/08/1963. The present suit by the 1st respondent was filed on 10/04/1964 for recovery of the amount due on various accounts referred to earlier.
Finding of the Court:
We are unable to agree with the submission of Mr. Ananta Babu that the deposit of title deeds in order to constitute a valid equitable mortgage within the meaning of Section 58 (f) of the Transfer of Property Act should be made physically by the borrower himself cannot be acceded to. True as contended by the learned counsel there is no physical handing over of the documents of title in the present case by the 2nd defendant to P. W. 1 the agent of the plaintiff but the documents of title till then deposited with the Indian Bank have been on the authorisation given by the 2nd defendant, sent by the Indian Bank to the plaintiff-bank after discharging their debt. The documents of title have been brought to the custody of the plaintiff-bank from the Indian Bank must be construed to he the agent of the 2nd defendant in handing over the title deeds to the plaintiff-bank. That apart the 2nd defendant himself has executed Ex. A-33 specifically mentioning that the documents of title have been deposited with the plaintiff-bank towards the amounts borrowed by him. On these facts we have no hesitation to hold that there was a valid deposit of title deeds by the 2nd defendant to the plaintiff bank so as to create an equitable mortgage.
Issues: 1. Whether the suit mortgage is true supported by consideration valid and binding on defendants 3 and 4 ? 2. Whether the same is not binding on 2nd defendant for the reasons mentioned by him in his written statement and whether the defendant no. 2 can plead against the suit claim in the absence of such a plea from 1st defendant ? 3. To what relief ?
Ratio Decidendi: The essential ingredients of an equitable mortgage by deposit of title deeds are (I) existence of a debt (ii) deposit of title deeds in respect of immovable property and (iii) intention that the title deeds shall be security for the debt. The delivery or deposit of title deeds may be physical or constructive. The essence of a mortgage by deposit of title deeds is the actual handing over of the documents of title in respect of immovable property by a borrower or his agent to the lender. It is the substance of the entire transaction but not its form that really matters to infer intention of the contracting parties. See Rachpal v. Bhagwandas AIR 1950 SC 272 and Union Bank of India Ltd. , v. M/s L. Sonaram (1965) 1 SCWR 726 = (AIR 1965 SC 1591 at p. 1593)
Final Decision: With the above modification relating to the rate of interest the appeal fails and is dismissed with costs. The costs in the suit as well as in this appeal payable to the respondent and the court-fee payable to the Government have to be recovered from the estate of the family. We grant 4 (Four) months time from today for redemption
( 1 ) THIS appeal by defendants 3 and 4 in O. S. No. 49 of 1964 on the file of the Court of the Subordinate Judge. Guntur is directed against the judgment and decree granted in favour of the Andhra Bank Ltd. , Guntur the 1st respondent herein, for recovery of Rs. 2,57,625. 47 paise from the defendants.
( 2 ) THE 2nd defendant the father of the defendants 3 and 4 opened various accounts such as open cash amount credit Key Cash Credit. Clean Overdraft Packing Credit and Secured Overdraft Account in the plaintiff-bank early in 1962 and was having credit facilities for carrying on his tobacco trade. He was receiving several amounts under various accounts creating security on goods on hand or on stocks reaching his godowns from day to day. Prior to opening the accounts in the plaintiff-bank he was having credit facilities from the Indian Bank Guntur wherefrom he had borrowed Rs. 75,000. 00 on an equitable mortgage by deposit of title deeds. According to the plaintiff-bank the 2nd defendant requested for a loan of Rs. 75,000. 00 for paying the same to the Indian Bank and created on equitable mortgage by deposit of title deeds as collateral security for due discharge of the then advanced money as well as the outstanding other dues under various accounts and such future advances as might be made by the plaintiff on such security. The amount of Rs. 75,000. 00 was paid by the plaintiff to the Indian Bank on 17-7-1962 as evidenced by Ex. A-21 and the voucher Ex. A-22. An equitable mortgage by deposit of title deeds was created in favour of the bank on 18-7-1962. Promissory notes also have been executed by the 2nd defendant in favour of the plaintiff in respect of the amounts borrowed on other accounts. The 2nd defendant was adjudged insolvent on 28/08/1963. The present suit by the 1st respondent was filed on 10/04/1964 for recovery of the amount due on various accounts referred to earlier.
( 3 ) THE 2nd defendant and defendant 3 and 4 have filed separate written statements. The 1st defendant was set ex parte.
( 4 ) THE defence set up by the 2nd defendant was that the did not approach the plaintiff-bank, but the latter had requested him to open several accounts for its own benefit that he did not create an equitable mortgage by deposit of title deeds on 18-7-1962 that he being ignorant of English language and due to the confidence reposed by him in the plaintiff-banks employees had simply signed some documents given to him without knowing the contents thereof and the various types of securities given by him would amply safeguard the amounts due to the plaintiff and the suit must be dismissed as frivolous.
( 5 ) IN the written statement filed on behalf of the defendants 3 and 4 it was alleged that they have been divided form the 2nd defendant and they are not undivided with their father as alleged in the plaint. The 2nd defendant was leading a reckless life gambling, drinking, and debauching and beating them and their mother cruelly and the debts created by the 2nd defendants in tobacco business and for other purposes are avyavaharika in nature and not binding on them. The 2nd defendant did not deposit the title deeds to create a mortgage as set up by the plaintiff and there was no need to mortgage the immovable properties of the family and hence the suit should be dismissed.
( 6 ) THE trial Court framed the following issues :"1. Whether the suit mortgage is true supported by consideration valid and binding on defendants 3 and 4 ? 2. Whether the same is not binding on 2nd defendant for the reasons mentioned by him in his written statement and whether the defendant no. 2 can plead against the suit claim in the absence of such a plea from 1st defendant ? 3. To what relief ?"
( 7 ) THE plaintiff examined P. Ws1 and 2 the agents of the plaintiff-bank at Guntur during the relevant period, and filed Exx. A-1 to A-51 in support of its case. None has been examined on behalf of the defendants 2 to 4 nor any document filed in support of
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