Palakkad Municipality v. The State Bank of Travancore, E.A. Yusuf, M.C. Subaida

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE K.HARILAL** **WEDNESDAY, THE 20TH DAY OF AUGUST 2014/ 29TH SRAVANA, 1936** **RSA.No. 507 of 2003 ( ) ------------------------** **AGAINST THE JUDGMENT IN AS 23/1998 of II ADDITIONAL DISTRICT COURT, PALAKKAD DATED 20-11-2002.** **AGAINST THE JUDGMENT IN OS 843/1995 of PRINCIPAL SUB COURT, PALAKKAD DATED 30-08-1997.** ## **APPELLANT/APPELLANT/1ST DEFENDANT:** **---------------------------------** **PALAKKAD MUNICIPALITY, REPRESENTED BY ITS SECRETARY, MUNICIPAL OFFICE, TOWN HALL ROAD, PALAKKAD-678 001.** **BY ADVS.SRI.T.C.SURESH MENON SRI.T.C.SURESH MENON SRI.R.RAJA RAJA VARMA SMT.M.R.VALSA** **RESPONDENTS/RESPONDENTS/PLAINTIFF/DEFENDANTS 2 AND 3: -----------------------------------------------------** **1. THE STATE BANK OF TRAVANCORE, REPRESENTED BY ITS MANAGER, WALAYAR BRANCH, WALAYAR, PALAKKAD.** **2. E.A. YUSUF, S/O. AMINA.** **3. M.C. SUBAIDA, W/O. E.A.YUSUF.** **RESPONDENTS 2 AND 3 ARE RESIDING AT EACHIYIL HOUSE, EDAKKARA POST, (VIA), KUNNAMKULAM, THRISSUR DISTRICT.** **R1 BY ADV. SRI.O.RAMACHANDRAN NAMBIAR R1 BY ADV. SRI.A.GOURISANKAR** **R2 & R3 BY ADV. SRI.K.MOHANA KANNAN** **R2 & R3 BY ADV. SMT.PRAVITHA A.R** **THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD ON 20-08-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **K. HARILAL, J.** **-----------------------------------------------------R.S.A. No.507 of 2003-B -----------------------------------------------------Dated this the 20[th] day of August, 2014** ## **JUDGMENT** The appellant is the 1[st] defendant in O..No.843 of 1995 on the files of the Court of the Subordinate Judge of Palakkad, as well as the appellant in A.S.No.23 of 1998 on the files of the Court of the District Judge of Palakkad. The above O.S. was filed by the 1[st] respondent/Bank for redemption of prior mortgage and to get delivery of the property from the 1[st] respondent/ Bank on depositing the charge amount due to the 1[st] defendant. The plaint averments are as follows: 2. The plaintiff/Bank sanctioned a total amount of Rupees One lakh as financial assistance by two occasions to the 2[nd] defendant for his contract works. ## **R.S.A. No.507 of 2003** -: 2 :- The 3[rd] defendant guaranteed repayment of the amount advanced and created an equitable mortgage of the plaint schedule property belonging to him to secure the loan. Another item of property at Kongad belonging to the 2[nd] defendant was also mortgaged. Thereafter Bank issued guarantee to the 2[nd] defendant for a sum of Rs.1,65,000/- and the mortgage was extended to cover all the liabilities. Under the above transactions, a sum of Rs.3,47,207.97ps. remains payable to the plaintiff/Bank. Plaintiff filed a suit against the 2[nd] defendant as O.S. No.158/85 before the Palakkad Sub Court for recovery of the dues. The suit was decreed and a decree for sale was passed. When defendants 2 and 3 failed to repay the decree amount, plaintiff filed Execution Petition for sale of the decree schedule properties. The Kongad property was purchased by the 2[nd] defendant in Court auction by a stranger. The plaint schedule item could not be sold for want of bidders. Thereafter, the Execution Petition was dismissed. Meanwhile, the plaintiff came to know ## **R.S.A. No.507 of 2003** -: 3 :- that the plaint schedule property had already been sold and purchased by the 1[st] defendant through court for alleged recovery of building tax arrears. Immediately, plaintiff requested the 1[st] defendant to furnish the details of the alleged sale. 1[st] defendant did not give any reply. On enquiries, plaintiff came to know that the 1[st] defendant had brought the plaint schedule property for sale by filing a suit for recovery of arrears of building tax without impleading the plaintiff. Plaintiff, being a subsequent charge holder, is very much deprived of this action of the 1[st] defendant. Hence a notice was sent on 7-3-1995 offering to pay the amount due to the 1[st] defendant being the charge holder and informing the plaintiff's intention to redeem the property. The notice was met with a reply from which it was learnt that the first defendant is not willing to accede to the request. The sale in favour of the 1[st] defendant is known to be confirmed on 21-11-1989 and the 1[st] defendant, who was the auction purchaser, obtained delivery through ## **R.S.A. No.507 of 2003** -: 4 :- court. The decree and the consequent purchase of the property by the 1[st] defendant would not affect the plaintiff's rights in any way. Third defendant has suffered a decree to defeat the plaintiff colluding with the first defendant and without observing the mandatory formalities of court sale, the first defendant had purchased the property for a paltry sum of Rs.20,005/-. The plaintiff prayed for redemption of prior mortgage and to get delivery of the property from the first defendant on depositing the charge amount due to the first defendant. 3. The 1[st] defendant filed a written statement denying the averments in the plaint. According to 1[st] defendant he being not a party to the suit filed by the plaintiff-Bank those proceedings are not binding on them. Six suits were filed by the 1[st] defendant as against the 3[rd] defendant for recovery of the arrears of property tax for the periods ranging from 1978 in respect of the buildings in the property and decrees for enforcement the charge over the property were **R.S.A. No.507 of 2003** -: 5 :- obtained. After consolidating the decrees the property was brought to sale and the 1[st] defendantdecree holder successfully bid the sale in auction for Rs.20,005/-. Pursuant to that, sale was confirmed, followed by grant of sale certificate. Since different portions of the building were in the occupation of tenants plaintiff got symbolic delivery through court. Since the property tax with regard to the building is a first charge on the property, by the court sale the property will vest with the purchaser free of all encumbrances. So, the plaintiff could not have any charge over the property now claimed. The so-called subsistence of mortgage liability of the 3[rd] defendant in favour of the plaintiff was neither known nor let known to the defendant. There is no mortgagormortgagee relationship between the plaintiff and the1st defendant and also with defendants 2 and 3. After court sale, there is no subsisting charge or mortgage liable to be redeemed. There is no impropriety or illegality in the sale proceedings. There ## **R.S.A. No.507 of 2003** -: 6 :- is no collusion with the 1[st] defendant in the matter of obtaining the decree. The suit is barred by limitation. There is no proper notice under the Municipalities Act. So according to the 1[st] defendant the suit is not maintainable and is liable to be dismissed with costs. 4. Defendants 2 and 3 have filed a separate joint written statement admitting the mortgage in favour of the plaintiff/Bank and disputing the court sale and delivery of the property to the 1[st] defendant. According to them, the property is outstanding in their possession even now. They are collecting rent from the tenants occupying different portions. 5. On the above pleadings, the trial court rightly framed the issue, is the prayer for redemption and recovery of possession allowable? Both parties adduced evidence on their respective pleadings. The Bank Manager as P.W.1 has given evidence about the loan transaction with defendants 2 and 3, creation of equitable mortgage, subsequent suit proceedings and decree obtained for sale of the building. Exts.A1 to **R.S.A. No.507 of 2003** -: 7 :- A9 were also marked. The 1[st] defendant has not adduced any counter evidence. But the 2[nd] defendant, when examined as D.W.1, has given evidence admitting the loan transaction. 6. After considering the evidence on record, the Sub Court decreed the suit as prayed for. Aggrieved by the decree and judgment, though the 1[st] defendant had preferred the above appeal, the appellate court also concurred with the findings of the trial court and dismissed the appeal. The legality and propriety of the concurrent findings, whereby the suit is decreed, granting redemption of prior mortgage, are under challenge in this Regular Second Appeal. 7. The learned counsel for the appellant/1[st] defendant advanced arguments challenging the concurrent findings, whereby the suit is decreed. According to the learned counsel, there is no mortgagor or mortgagee relationship between the appellant/1[st] defendant and the 1st respondent/ plaintiff. But the courts below erroneously conferred ## **R.S.A. No.507 of 2003** -: 8 :- the status of prior mortgagee to the 1[st] defendant and puisne mortgagee to the plaintiff. Secondly, it is contended that the courts below have lost sight of the fact that all mortgages created were as of charges do not create the mortgage. Thirdly, the courts below went wrong by finding that puisne mortgagee is entitled to redeem the prior mortgage, which stand in favour of prior mortgage. 8. Per contra, the learned counsel for the respondents advanced arguments justifying the concurrent findings of the courts below whereby the suit is decreed, granting redemption of the mortgage. According to the respondent/plaintiff, the courts below can be justified in treating the 1[st] defendant as a prior mortgagee and the plaintiff as a puisne mortgagee. So also, the courts below can be justified in finding that the puisne mortgagee is entitled to redeem the prior mortgage which stands in favour of the prior mortgagee. ## **R.S.A. No.507 of 2003** -: 9 :- 9. In view of the rival contentions, the questions to be considered in this R.S.A. are: (1) Whether the courts below were justified in law in treating the 1[st] defendant as a prior mortgagee and the plaintiff as a puisne mortgagee when the charge in favour of the 1[st] defendant is created by a statute only? (2) Have the courts below erred in holding that the puisne mortgagee can redeem the prior mortgage which stands in favour of the prior mortgagee subject to the payment of charge in favour of the prior mortgagee? According to Section 237 of the Kerala Municipalities Act, 1994 (Section 103 of the Kerala Municipalities Act,1960), the property tax of buildings and lands shall, subject to the prior payment of the land revenue, if any, due to the Government thereon, be a first charge upon the said buildings or land belonging to the person liable to such tax. Section 100 of the **R.S.A. No.507 of 2003** -: 10 :- Transfer of Property Act says that where immovable property of one person by act of parties or operation of law made security for payment of money due to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property. Further the said Section itself clarifies that all the provisions which apply to a simple mortgage shall, so far as may be, apply to such charge. As rightly held by the first appellate court when the legislature used the word “charge” in the Kerala Municipalities Act, the legislature was well aware of the definition of “charge” given under Sec.100 of the T.P. Act also. According to Sec.91 of the Transfer of Property Act, any person who has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same. 10. On a conjoint reading of Sec.237 of the Kerala Municipalities Act and Sec.100 of the T.P. Act in juxtaposition, the courts below can be justified in treating the prior charge created in favour of the 1[st] ## **R.S.A. No.507 of 2003** -: 11 :- defendant as a simple mortgage. If that be so, the plaintiff will get the status of puisne mortgagee and the 1[st] defendant will get the status of prior mortgagee. On a conjoint reading of Secs.100 and 91 of the T.P. Act, the courts below can be justified in finding that as a puisne mortgagee the bank is entitled to sue the prior mortgagee for redemption. 11. The next point to be considered is whether the puisne mortgagee's right of redemption will be affected by the decree and consequent purchase by the prior mortgagee in the sale in execution of a decree. This point is covered by the decision in Amulya Gopal v. United Industrial Bank Limited [AIR 1981 Calcutta 404]. In view of the above decision, the courts below can be justified in holding that the puisne mortgagee's right to sue for sale, subject, of course, to the prior mortgage and his further right to redeem the prior mortgage before putting up the property for sale to satisfy his own claim were not lost and the puisne mortgagee is entitled to enforce both rights. ## **R.S.A. No.507 of 2003** -: 12 :- 12. The courts below rightly decided the question of law involved in this appeal. I find no illegality or impropriety in the findings, whereby the trial court decreed the suit and the appellate court confirmed the same. No question of law was left undecided. This Regular Second Appeal is devoid of merits. This Regular Second Appeal is dismissed accordingly. Sd/- **(K. HARILAL, JUDGE)** ## **Nan/** //true copy// P.S. to Judge