Judges : M.S.MENON,T.K.JOSEPH
D.C.Johar and Sons Ltd. - Appellant
Versus
Mathew - Respondent
Case No : A. S. No. 419 of 1958, 8, 10, 39 of 1959
Decided On : 03/16/1961
Advocates Appeared :
A. S. Krishna Iyer; A. K. Ramaseshadrinathan; For Appellant T. P. Poulose; K. J. Louis; For Appellant V. O. John; For Addl. Respondent K. P. Pathrose; For 1st Respondent K. P. Abraham; For 4th RespondentC. A. Ouseph; C. J. Antony; T. C. George; For 8th Respondent
EQUITABLE MORTGAGE - PROPERTY ATTACHMENT - CODE OF CIVIL PROCEDURE - [FACT OF THE CASE] Two brothers created an equitable mortgage as security for an overdraft account with a bank. The bank sued for recovery of the amount due under the transaction. The properties were attached in execution of a decree, and subsequent mortgages were executed. Disputes arose regarding the validity of the mortgages and the order of property sale. [FINDING OF THE COURT] The court ruled in favor of the banks and decreed the suits. The court set aside the direction to sell the second defendant's properties first. [ISSUES] The issues included the validity of the mortgages, the order of property sale, and the applicability of marshalling principles. [RATIO DECIDENDI] The court held that the mortgages were not void against claims enforceable under the attachment, and the right to claim for marshalling did not apply. The court also emphasized the effect of setting aside the sale under Order XXI, R.89 and the cessation of claims enforceable under the attachment. [FINAL DECISION] The court modified the decree, confirmed the order disallowing execution of the decree, and dismissed the appeals. The mortgages were upheld, and the property attachment ceased to exist. The decree-holder was free to proceed against any property charged under the decree.
1. The facts necessary for the decision of these appeals may be stated: Two brothers, Mathew and Kuruvilla, had an overdraft account with the South Indian Bank Limited; as security for the amount borrowed they created an equitable mortgage of their properties on 14-10-1950. The South Indian Bank sued for recovery of the amount due under the transaction in O.S. No. 39 of 1954 of the District Court of Anjikaimal which suit was later transferred to the Subordinate Judge's court of Ernakulam where it was registered as O.S. No. 85 of 1958. Defendants 1 and 2 in that suit are Mathew and Kuruvilla and the 6th
defendant is Johar & Sons, Ernakulam. The first defendant executed a mortgage on 18-1-1951 for Rs. 43,899-2-10 in favour of the Palai Central Bank Ltd. The Bank sued on the mortgage in O.S. No. 63 of 1953 of the District Court of Anjikaimal and the suit was later transferred to the Subordinate Judge's court of Ernakulam where it was registered as O.S. No. 84 of 1958. Mathew and Kuruvilla are defendants 1 and 2 in that suit and Johar & Sons the 8th defendant. Johar & Sons happened to be impleaded in the two suits as assignee-decree-holder in O.S. No. 6 of 1123 of the District Court of Trichur and decree-holder in O.S. No. 68 of 1952 of the District Court of Anjikaimal. These two were unsecured decrees obtained against Mathew. Items 1 and 2 of schedule A and items 1, 2, 3, 6, 7, 8,10 & 11 of schedule B were attached in execution of O.S. No. 6 of 1123 on 3-4-1950 and one item had been sold in execution and purchased by the manager of Johar & Sons who deposited the sale amount. Johar and Sons had also applied for rateable distribution for the decree amount in O.S. No. 68 of 1952. The money realised in execution was not disbursed as Mathew had in the meanwhile applied for being adjudicated an insolvent in I.P. No. 13 of 1952 of the District Court and an interim receiver had been appointed in insolvency. Johar & Sons contended in the suits filed by the South Indian Bank and the Palai Central Bank that the respective mortgages on which the banks sued were void as the same were executed after the attachment of Mathew's interest in the properties, in execution of the decree in O.S. No. 6 of 1123. Though O.S. No. 58 of 1952 was instituted after the dates of the two mortgages, Johar & Sons had a case that the mortgages were void in respect of the decree in that suit also as there was an application for rateable distribution in respect of that decree which thus became a claim enforceable under the attachment in O.S. No. 6 of 1123. The Palai Central Bank applied under Order XXI, R.89 of the Code of Civil Procedure for setting aside the sale in O.S No. 6 of 1123 and deposited the requisite amount under the rule. The sale was cancelled and Johar & Sons preferred a civil miscellaneous appeal in the High Court of Travancore-Cochin as CMA. No 146 of 1955. Ext. P.16 is copy of the judgment of the High Court in the civil miscellaneous appeal. The order setting aside the sale was confirmed and certain directions were given for disbursement of the amount paid by the auction purchaser and the Palai Central Bank. It may also be mentioned that the Palai Central Bank claimed in their suit the amount so deposited for setting aside the sale. The contentions of Mathew and Kuruvilla who are defendants 1 & 2 in the two suits may now be referred to. Kuruvilla contended that he was only a surety and that his properties should be sold in the South Indian Bank's case only after exhausting all remedies against the first defendant and his properties. The Palai Central Bank contended that the South Indian Bank should proceed against the second defendant's properties in the first instance. Overruling the contentions of Johar & Sons, the two suits were decreed. The Palai Central Bank, the second mortgagee, was given a decree for the amount sued for and out of the amount decreed, Rs. 4,513-6-6 being the amount deposited for cancellation of the sale in O.S.
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