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2018 Supreme(Mad) 3749
IN THE HIGH COURT OF JUDICATURE AT MADRAS
V.M. VELUMANI, J.
Purasawakum Permanent Fund Ltd. - Appellant
Versus
G. Kamalam - Respondent
Second Appeal No. 549 of 2015
Decided On : 26-09-2018
V. Raghupathi, Adv., M. Rajaraman, Adv.
Headnote:
MORTGAGE - REDEMPTION - INTEREST ON DEFAULTED INSTALLMENTS - VALIDITY - APPROPRIATION OF PAYMENTS - DISCRETION OF COURT TO FIX INTEREST RATE - PRELIMINARY DECREE.
Fact of the Case:
The respondents borrowed a sum of Rs. 3,00,000/- from the appellant and executed a Deed of Mortgage on 17.11.1994 in favour of the appellant. The appellant paid only a sum of Rs. 2,90,150/- by a cheque dated 19.11.1994. As per the terms of Mortgage Deed, the amount borrowed has to be repaid in 92 equal monthly installments at Rs. 6,600/- towards principal and interest from December 1994 upto July 2003. The respondents are depending on rental income. The respondents filed various proceedings for eviction of the tenants, in view of their default in payment of rents. The respondents in spite of several constraints, paid a sum of Rs. 5,06,446.40 on various dates as per the details given in the plaint. The total amount payable is Rs. 6,07,200/-. As per the Mortgage Deed, the mortgage loan has to be paid in 92 equal monthly installments at Rs. 6,600/-, which is principal and interest at 21% p.a. The monthly installment has to be paid on or before the last working day of the month. In case of default in payment of monthly installments, it will carry interest at 21% p.a. or at any other rate fixed from time to time. The conditions stipulated are to the effect of levying of interest on interest and double the interest on the principal sum. The conditions imposed in the mortgage deed are in contravention of the provisions of Section 23 of the Contract Act and Section 58(a) of the Transfer of Property Act. Therefore, such covenants are void in nature and the appellant is entitled to claim only the interest on the principal sum of Rs. 2,90,150/- at the rate now fixed by the appellant. The respondents are entitled to redeem the property without reference to the conditions of the Mortgage Deed.
Finding of the Court:
The Court held that the appellant is entitled to charge interest on the defaulted installments and the same is valid and not opposed to public policy and is entitled to adjust the amount paid by the respondents first towards interest due on the defaulted installments and then towards defaulted installments and then only towards current monthly installments.
Issues: 1. Whether the Courts below are justified in ignoring and disregarding the terms and conditions in the Mortgage Deed Ex.A.1 as per which the Defendant/Mortgagee can claim interest on interest as per the settled law? 2. Whether the lower appellate Court is justified in finding that the defendant cannot enforce the unlawful terms of Mortgage Deed contrary to fact that all terms and conditions in the Mortgage Deed Ex.A.1 are lawfully executed and registered by the Mortgagors/Plaintiffs? 3. Whether the lower appellate Court has exceeded its Power in rejecting the prayer of passing final decree as per Clause (4) of the decree of the Trial Court? 4. Whether the Courts below are justified in rejecting the claim of the Mortgagee who will be entitled to apply the general rule of appropriation by appropriating the amount deposited first towards interest, towards cost and finally towards principal amount due under the decree as per various decisions of this Court including that of the decision of the Constitution Bench of the Hon'ble Supreme Court of India in Gurpret Singh, (2006) 8 SCC 457?
Ratio Decidendi: 1. The Mortgagee is entitled to charge interest on the defaulted installments. 2. The conditions imposed in the mortgage deed are in contravention of the provisions of Section 23 of the Contract Act and Section 58(a) of the Transfer of Property Act. Therefore, such covenants are void in nature and the appellant is entitled to claim only the interest on the principal sum of Rs. 2,90,150/- at the rate now fixed by the appellant. 3. The respondents are entitled to redeem the property without reference to the conditions of the Mortgage Deed.
Final Decision: The Second Appeal is allowed. There shall be a preliminary decree for Rs. 10,87,819.51 together with interest at 15% p.a. on the principal sum of Rs. 2,80,200/- from the date of suit till the date of preliminary decree, namely, 26.09.2018 and thereafter, at 6% p.a. on the principal amount, cost of the suit and other expenses incurred by the appellant in respect of the mortgaged property and four months time from the date of receipt of a copy of this judgment is granted to pay the amounts; A sum of Rs. 1,46,338.30 deposited by the respondents should be appropriated first towards interest, thereafter, towards interest on defaulted installments, and then on the defaulted installments and if there is any balance, towards principal amount; If the respondents pay the amount as decreed within the time granted, the appellant shall deliver the documents of title to the respondents; If the respondents fail to pay the amount decreed, it is open to the appellant to sell the mortgaged property either by public auction as per Section 69 of the Transfer of Property Act without intervention of the Court or file an application for final decree for sale of the mortgaged property; the decree of permanent injunction is set aside; and the appellant is entitled to cost throughout.
V.M. VELUMANI, J.
1. The appellant is the defendant in O.S.No.2363 of 2006. The respondents filed the above suit seeking to redeem the mortgage and for a preliminary decree ordering that an account be taken of what was due to the appellant/defendant on the date of decree for principal and interest on the mortgage dated 19.11.1994; to direct the appellant to deliver all the documents in their possession relating to the mortgaged property and re-transfer the property described in the schedule to the respondents/plaintiffs; and for permanent injunction restraining the appellant from bringing the mortgaged property by public auction.
2. The case of the respondents:-
The house and premises bearing New No.21, Old No.15, Kalingaraya Mudali Street, 3rd Lane, Old Washermanpet, Chennai-21, described in the schedule to the plaint originally belonged to one Lakshmanan. After his demise, the respondents inherited the same. In order to meet the family expenses and to redeem the jewels, the respondents borrowed a sum of Rs. 3,00,000/- from the appellant and executed a Deed of Mortgage on 17.11.1994 in favour of the appellant. The appellant paid only a sum of Rs. 2,90,150/- by a cheque dated 19.11.1994 drawn on Canara Bank, Kellys, Purasawalkam, Chennai -7. As per the terms of Mortgage Deed, the amount borrowed has to be repaid in 92 equal monthly installments at Rs. 6,600/- towards principal and interest from December 1994 upto July 2003. The respondents are depending on rental income. The respondents filed various proceedings for eviction of the tenants, in view of their default in payment of rents. The respondents in spite of several constraints, paid a sum of Rs. 5,06,446.40 on various dates as per the details given in the plaint. The total amount payable is Rs. 6,07,200/-.
2.1. As per the Mortgage Deed, the mortgage loan has to be paid in 92 equal monthly installments at Rs. 6,600/-, which is principal and interest at 21% p.a. The monthly installment has to be paid on or before the last working day of the month. In case of default in payment of monthly installments, it will carry interest at 21% p.a. or at any other rate fixed from time to time. The conditions stipulated are to the effect of levying of interest on interest and double the interest on the principal sum. The conditions imposed in the mortgage deed are in contravention of the provisions of Section 23 of the Contract Act and Section 58(a) of the Transfer of Property Act. Therefore, such covenants are void in nature and the appellant is entitled to claim only the interest on the principal sum of Rs. 2,90,150/- at the rate now fixed by the appellant. The respondents are entitled to redeem the property without reference to the conditions of the Mortgage Deed.
2.2. The respondents filed O.S.No.3817 of 2005 for permanent injunction and the same is pending on the file of XVIII Assistant City Civil Court, Chennai. Now, the appellant is charging interest only at 15% p.a. and the respondents are liable to pay only a sum of Rs. 1,46,338.30 as on date of filing of the suit. The respondents have filed the suit for a judgment and decree for redemption of the suit property on payment of Rs. 1,46,338.30 within the time of six months from the date of judgment and decree and the statement of account filed along with the plaint may be treated part and parcel of the plaint.
3. The case of the appellant:-
The appellant filed written statement denying all the allegations made in the plaint by the respondents. The respondents borrowed property loan of Rs. 3,00,000/- and agreed to repay the said sum in 92 monthly installments at Rs. 6,600/- to be paid on or before last working day of the month. If the respondents failed to pay the installment, it will be treated as unpaid installment and it will carry interest at 21% p.a. The said rate of interest on unpaid installments was increased to 24% p.a. from November 2000 as per the resolutions passed by the Board of Directors. The respondents paid only t
