TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether the 1928 mortgage bond secured only an existing debt of Rs. 15,000 or also covered a floating balance and future advances within the stipulated limit. (ii) Whether the unsecured overdrafts in the current account were saved from limitation as items in a mutual, open and current account or by part-payments. (iii) Whether the rule in Clayton's Case applied so as to treat the secured debt under the first bond as satisfied by later credits. (iv) Whether the 1933 mortgage bond failed for want of consideration or merged the earlier bond debt, and whether instalments could be granted under Order 20 Rule 11.
Issue (i): Whether the 1928 mortgage bond secured only an existing debt of Rs. 15,000 or also covered a floating balance and future advances within the stipulated limit.
Analysis: The bond language showed that the parties contemplated a continuing accommodation, not merely a past debt. The stipulation that the debt should at no time exceed Rs. 15,000, coupled with the clause allowing repayment by December 1931 and later suit for the principal with interest, indicated an indebtedness capped at Rs. 15,000 inclusive of interest. The conduct of the parties and the later treatment of the account also supported the view that the bond continued as security, but only within the contractual limit and only up to the stipulated period.
Conclusion: The bond was treated as security for a floating indebtedness up to Rs. 15,000 inclusive of interest, but it did not authorise fresh secured advances after December 1931.
Issue (ii): Whether the unsecured overdrafts in the current account were saved from limitation as items in a mutual, open and current account or by part-payments.
Analysis: The account was open and current, but not mutual in the legal sense because the credits were not part of reciprocal dealings creating independent cross-demands. The account had, for long periods, only one real debtor and creditor relationship, with the defendant as debtor. Part-payments signed by the defendant did not extend limitation for the entire running balance, because each overdraft was to be treated as an independent loan and the payments could not revive the whole account debt. The unsecured overdrawals therefore remained governed by the ordinary limitation applicable to each advance.
Conclusion: The account was not mutual, Article 85 did not apply, and the unsecured overdrafts were barred by limitation.
Issue (iii): Whether the rule in Clayton's Case applied so as to treat the secured debt under the first bond as satisfied by later credits.
Analysis: The rule in Clayton's Case is only a rule of evidence based on presumed intention and is displaced where the circumstances show a different appropriation. The parties' conduct showed that the first bond was intended to remain alive as security, and the later crediting of the second loan was delayed in a manner consistent with protecting the first security. The later deposits were therefore to be appropriated first to unsecured debt and only thereafter to the secured balance, instead of automatically extinguishing the secured debt by chronological debit-item order.
Conclusion: The first bond was not satisfied in full by the later credits, and the secured liability continued to the extent worked out on that basis.
Issue (iv): Whether the 1933 mortgage bond failed for want of consideration or merged the earlier bond debt, and whether instalments could be granted under Order 20 Rule 11.
Analysis: The second bond was supported by consideration because the loan was actually given by book credit and applied in reduction of the defendant's indebtedness. The reference to the earlier bond did not show that the second bond was merely a payment of the first bond debt; rather, the two securities operated alongside each other subject to appropriation of payments. The prayer for instalments could not succeed because the decree in question was a mortgage decree and not a simple money decree.
Conclusion: The 1933 bond was valid and supported by consideration, and instalments under Order 20 Rule 11 were not available.
Final Conclusion: The decree was maintained in substance in favour of the bank, with only a partial modification to the computation and interest on the first bond, while the appeal failed and the cross-objection succeeded only to a limited extent.
Ratio Decidendi: A mortgage securing a running account is construed by its terms and the parties' conduct, limitation on unsecured overdrafts is not saved by a merely current account lacking mutuality, and appropriation of payments will not mechanically follow Clayton's Case where the circumstances show a different intention.
TaxTMI 
