Back
1974 Supreme(Mad) 535
Madras High Court
RAMAPRASADA RAO,RATNAVEL PANDIAN
The South Indian Bank Ltd.by its General Manager, M.G.P.Nambiar - Appellant
Versus
V.Krishna Chettiar and Bros.by its partner V.K.Palaniappan - Respondent
Decided On : 12/18/1974
C. Kurian, N.E. Arumgham and N. Kanakaraju, for Petitioner; M.S. Venkatarama Iyer, V. Krishnan and Sankaran, for Respondents.
A hypothecation deed can be acted upon or enforced to create a charge over moveable property, even if such property is annexed to immoveable property, provided that the parties intended the property to be treated as moveable property.
Headnote:
HYPOTHECATION - MOVEABLE PROPERTY - EMBEDDED TO EARTH - INTENTION OF PARTIES - INTEREST - USURY - RATE OF INTEREST.
Fact of the Case:
The plaintiff bank granted financial aid to the defendants' partnership firm under various heads, including key loan advances, cash credit open loans, bills purchases account, and cheques discounting account. The partnership firm was running an oil mill and a ginning factory. The premises in which the machinery of the mill and the factory was situate belong to some of the partners of the firm. In connection with the advances made by the Bank to the partnership firm, in connection with the partnership business, two kinds of securities were offered by the partners. The first one was under Ex. A-24, dated 15-5-1964, wherein some of the partners of the firm, who are the owners of the premises which contained the machinery deposited the title deeds of the premises at Coimbatore, with the intention of creating an equitable mortgage thereon. The other security which they offered was under Ex. A-29, dated 20-5-1964, which was in connection with an express loan granted by the Bank to the tune of Rupees 80,000 on a hypothecation of the machineries and moveables contained in the mill premises, but delineated into a particular schedule attached to Ex. A-29, which was the deed of hypothercation.
Finding of the Court:
The court found that the hypothecation deed, Ex. A-29, could be acted upon or enforced, as the hypotheca, in the peculiar circumstances the case, ought to be understood as moveable property annexed to immoveable property and, in the absence of a registered instrument on the foot of which such a relief could be asked, the trial Court negatived the relief for a charge over the B schedule properties for the recovery of the suit claim. On the other question whether the interest at 11 per cent per annum with quarterly rests, was usurious, it found in favour of the defendants.
Issues: 1. Is the alleged mortgage over the plaint A Schedule properties by deposit of title deeds true, valid and binding on any or all of the defendants? 2. Is the alleged charge over the plaint B schedule properties true, valid and binding on the defendants? 3. Is there any charge over items 25 to 28 of the plaint B schedule properties? 4. What is the amount for which the charge, if any, is available over one or more of plaint B schedule properties? 5. Is the plaintiff entitled to club together plaint A and B schedule properties for the entire suit amount? 6. Is the plaintiff entitled to claim interest at 11 per cent per annum and not at 9 per cent per annum? 7. Are the alleged mortgages and charge unlawful and do they amount to a fraud on the statute as pleaded by the 9th defendant? 8. What is the amount, if any, due to the 9th defendant in respect of the mortgage deed dated 17-11-1965? 9. What is the nature of the decree that the 9th defendant is entitled to? 10. To what relief is the plaintiff entitled?
Ratio Decidendi: The court held that the hypothecation deed, Ex. A-29, related to moveable property and that the plaintiff, therefore, in terms of Ex. A-29, is entitled to claim a charge decree over the properties described in the B schedule to the plaint, which are the moveables enumerated in Ex. 29. The court also held that the rate of interest of 11 per cent per annum with quarterly rests was not usurious or excessive, as it was agreed to by the parties and was in line with the increased demand for interest by the Reserve Bank of India.
Final Decision: The court allowed the appeal and reversed the trial court's decision. It decreed the suit for the amount claimed by the plaintiff, with interest at 11 per cent per annum with quarterly rests up to the date of the plaint and at the rate of 11 per cent per annum from the date of the suit till the date of payment. The court also passed a mortgage decree including schedules A and B as the hypotheca or the security from which the plaintiff could realise the decree amount.
RAMAPRASADA, RAO, J.:- The plaintiff in O.S. 85 of 1966 on the file of the Subordinate Judge, Salem, is the appellant Defendants 2 to 8, as partners of a registered partnership firm, known as V. Krishna Chettiar and Bros, had on application obtained financial aid from the plaintiff Bank under four different heads, such as, key loan advances, cash credit open loans, bills purchases account and cheques discounting account. From time to time, under one or the other of the heads of advances, moneys were lent by the plaintiff Bank to the partnership firm. The partnership was running an oil mill and a ginning factory. The premises in which the machinery of the mill and the factory was situate belong to some of the partners of the firm. But in connection with the advances made by the Bank to the partnership firm, in connection with the partnership business, two kinds of securities were offered by the partners. The first one was under Ex. A-24, dated 15-5-1964, wherein some of the partners of the firm, who are the owners of the premises which contained the machinery deposited the title deeds of the premises at Coimbatore, with the intention of creating an equitable mortgage thereon. The other security which they offered was under Ex. A-29, dated 20-5-1964, which was in connection with an express loan granted by the Bank to the tune of Rupees 80,000 on a hypothecation of the machineries and moveables contained in the mill premises, but delineated into a particular schedule attached to Ex. A-29, which was the deed of hypothercation.
2. The case of the plaintiff is that the defendants were operating on the various accounts under which financial aid was given by the Bank to the partnership firm. Originally, the rate of interest at which the amount so advanced by the Bank was repayable by the defendants, was agreed to at 9 per cent per annum with quarterly rests. Later, admittedly, under Ex. A-33, having regard to the increased demand in the rate of interest by the Reserve Bank of India, the rate of interest was increased from 9 per cent to 11 per cent per annum. The plaintiff has come to court for the realisation of the amount due and payable by the defendants under the various heads of account and under the various heads of account and under which advances were made by the Bank to the defendants' partnership firm. The suit was laid for the recovery of a sum of Rs. 1,52,941-50 made up of a sum of Rs. 83,941-77 or the cash credit open loan and a sum of Rs. 66,725-20 under the Fully Secured Account and a sum of Rs. 95-87 under the cash credit account. The plaintiff claims that it would be entitled to a concurrent remedy against defendants personally for the recovery of the suit debt and also sought for a charge decree against the immovable property, which is the mill premises which was equitably mortgaged with it, under Ex. A-24, and also sought a charge on the machineries enumerated in the deed of hypothecation Ex. A-29, dated 20-5-1964.
3. The 9th defendant was added on as a party-defendant, as it appears that he is a subsequent mortgagee over the immovable properties.
4. In so far as the defence is concerned, the defendants do not dispute the accounts and the principal amount due. Inter alia, the main contention raised by the defendants was that the plaintiff, by virtue of the deed of hypothecation, Ex. A-29, is not entitled to claim a charge on the machineries and moveable properties in the mill premises, as according to the defendants, the said machineries have got embedded themselves with the premises, which contained them and, therefore, such moveable properties or machinery enumerated in the deed of hypothecat on should be deemed to be annexed to the immoveable property and in the absence of a regular instrument of mortgage, as contemplated under the Transfer of Property Act, and registered under the Registration Act, the deed of hypothecation, by itself, cannot create a right in the plaintiff to seek for a charge decree as ag
