1968 (12) TMI 100 - SC - Indian Laws

Puisne Mortgagee's Separate Suit Rights & Interest Awarded

Soli Pestonji Majoo Versus Gangadhar Khomka

The court held that a puisne mortgagee, after being a party in a prior mortgagee's suit, could initiate a separate suit for his mortgage and seek a decree ... - Issues Involved:1. Entitlement of a puisne mortgagee to institute a separate suit after being a party in a prior mortgagee's suit.2. Rate of interest applicable post the date of the suit.Issue-wise Detailed Analysis:1. Entitlement of a Puisne Mortgagee to Institute a Separate Suit:The primary issue was whether a puisne mortgagee, who was a party in a prior mortgagee's suit, could initiate a separate suit for his mortgage and seek a decree in Form 5-A after the prior mortgagee's claim was settled without a sale of the mortgaged property. The appellant argued that the respondent, being a puisne mortgagee, should have applied for a final decree for sale in the original suit (Suit No. 135 of 1948) and could not bring a fresh suit. The court rejected this argument, stating that Clause 5 of the decree in Form 9 allows a puisne mortgagee to apply for a final decree if he redeems the prior mortgage. The puisne mortgagee can step into the shoes of the prior mortgagee and apply for a final decree if he pays off the prior mortgage. The court emphasized that a puisne mortgagee is added as a defendant in such suits to redeem the prior mortgage if desired and to prove his mortgage for participation in any surplus sale proceeds. The rights of a puisne mortgagee are to redeem the prior mortgage and participate in surplus sale proceeds. This view is supported by precedents like Vedavyasa Ayyar v. The Madura Hindu Labha Nidhi Co. Ltd. and Shiv Kumar Prosad v. The Trustees for the Improvement of Calcutta. English practices, as mentioned in Platt v. Mendel, were distinguished from Indian practices under the Transfer of Property Act and the Civil Procedure Code. The court concluded that the respondent was entitled to institute a separate suit for his mortgage.2. Rate of Interest Applicable Post the Date of the Suit:The second issue was whether the High Court was justified in granting interest at the rate of 12% per annum with monthly rests after the date of the suit. The appellant contended that the maximum interest should not exceed 6% per annum simple interest on the principal sum adjudged. The court found this argument well-founded. Historically, under Section 34 of the Civil Procedure Code, courts had discretion to order interest at reasonable rates on the principal sum from the date of the suit. However, Order 34, Rules 2 and 4, which apply to mortgage suits, required courts to account for interest as per the mortgage contract until the redemption period expired. After the redemption period, interest depended on the decree's directions. The 1929 amendment to Order 34 inserted Rule 11, giving courts discretion to order interest at reasonable rates post the suit date. The Federal Court in Jaigobind Singh v. Lachmi Narain Ram held that Rule 11 provided courts with discretion regarding pendente lite and subsequent interest, even if the contractual rate was not penal or excessive. Applying this principle, the court decided that the respondent should receive interest at the contractual rate until the suit date and simple interest at 6% per annum on the principal sum from the suit date until realization.Conclusion:The appeal was allowed to the extent that the decree of the Calcutta High Court was modified. The respondent was awarded interest at the contractual rate until the suit date and simple interest at 6% per annum from the suit date until realization. The respondent was also awarded costs proportionate to his success in the present suit but not for the previous suit (Suit No. 135 of 1948). The High Court's order regarding costs was modified accordingly, with no order as to costs for this appeal.