1969 (2) TMI 194 - SC - Indian Laws

Supreme Court reinstates District Court's ruling on genuine mortgages, finds High Court overstepped its jurisdiction.

Malini Ayyappa Naicker (Now Dead) through I.R. and Ors. Versus Seth Manghraj Udhavadas Firm by Managing Partner Chathurthuj Chhabildas (Dead) Thereafter by I. Ss. and Ors.

Malini Ayyappa Naicker (Now Dead) through I.R. and Ors. Versus Seth Manghraj Udhavadas Firm by Managing Partner Chathurthuj Chhabildas (Dead) Thereafter ... Issues Involved:1. Jurisdiction of the High Court under the 1st proviso to Section 75(1) of the Provincial Insolvency Act.2. Correctness of the High Court's conclusions on the facts and circumstances of the case.Issue-wise Detailed Analysis:1. Jurisdiction of the High Court under the 1st proviso to Section 75(1) of the Provincial Insolvency Act:The primary question was whether the High Court had the jurisdiction to interfere with the findings of fact reached by the District Court. The appellants argued that the High Court's power under the 1st proviso to Section 75(1) was very limited, akin to the power conferred under Section 100 of the CPC, which does not allow for reappreciation of evidence. The respondents contended that the High Court had an extensive power to ensure that the order of the District Court was according to law, including the right to examine whether all material evidence was considered and properly assessed.The judgment clarified that the legislature did not confer appellate power on the High Court under the 1st proviso to Section 75(1) of the Act. The High Court is generally bound by the findings of fact reached by the District Court unless there is a miscarriage of justice. The decision being 'according to law' is broader than 'contrary to law' under Section 100(1)(a) of the CPC. The High Court's power is similar to that under Section 25 of the Provincial Small Causes Courts Act, enabling it to ensure no miscarriage of justice and that the decision was given according to law.2. Correctness of the High Court's conclusions on the facts and circumstances of the case:The High Court had reversed the findings of the District Judge, which had held that the mortgages were genuine and supported by consideration. The Supreme Court examined whether the High Court's conclusions were sustainable on the evidence on record.The undisputed facts were that the insolvents had money dealings with the family of Srinivasa Naicker since 1925, and there was no relationship between the insolvents and the mortgagees. The mortgagees claimed that the promissory notes (Exhs. A-11 and A-12) were taken as stop-gap arrangements, and the recitals in the mortgage deeds accorded with the original agreement for cash consideration.The District Judge had relied on the account entries and other evidence, finding the transactions genuine. The High Court, however, was influenced by the apparent contradiction between the recitals in the mortgage deeds and the promissory notes, and the failure of the mortgagees to produce their account books.The Supreme Court held that the findings of the District Judge regarding the payment of consideration were findings of fact and not open to review by the High Court. The evidence of the mortgagees was corroborated by the entries in the insolvents' account books, and the adverse inference from the failure to produce account books was rebutted by other evidence.The Supreme Court examined the specific items of consideration under Exhs. A-1 and A-2. For Exh. A-2, the payment of Rs. 10,000 under the promissory note, Rs. 1,700 paid in cash, and Rs. 3,300 paid in cash were supported by the account entries and held valid. For Exh. A-1, the payment of Rs. 10,000 under the promissory note and Rs. 500 interest were supported by account entries. However, the payment of Rs. 4,500 on November 6, 1950, was not satisfactorily proved due to the lack of documentary evidence.Conclusion:Civil Appeal No. 846 of 1963 was allowed, setting aside the High Court's judgment and restoring the District Court's judgment. Civil Appeal No. 845 was allowed in part, validating the mortgage Exh. A-1 to the extent of Rs. 10,500 and interest thereon. The parties were directed to bear their own costs in all courts.