2024 (8) TMI 1393 - SC - Indian Laws

Supreme Court sets aside mortgage decree after Division Bench failed to consider Section 58(f) validity requirements

A.B. GOVARDHAN Versus P. RAGOTHAMAN

SC allowed the appeal regarding a mortgage decree dispute. The Division Bench erred by not considering Section 58(f) of the Act when evaluating the ... Existence of valid mortgage entitling appellant to sue for a mortgage decree or not - HELD THAT:- Quite evidently, the Division Bench did not account for Section 58(f) of the Act. Indubitably, the respondent pleaded threat and coercion whilst executing/signing the Agreement, yet having accepted that he did sign the same in his own hand, the burden was on him to prove such threat/coercion. Looked at from any angle, the First Impugned Order suffers from legal errors, and cannot withstand the scrutiny of law. How and why the appellant went into slumber? - HELD THAT:- A ‘fantastic’ plea was taken that the appellant had engaged a counsel only for the delay condonation MP and not to argue the main appeal. Such a contention is noted only for the purpose of outright rejection. This ‘fantastic’ plea has been dealt with correctly by the Division Bench and no legal infirmity can be found therein. It is already indicated that the First Impugned Order has to be set aside. In order to do justice, quashing of the First Impugned Order would necessarily mean that the effect of the Second Impugned Order would get nullified, for all practical purposes, despite this Court being of the view that on its own merits, the Second Impugned Order cannot be faulted. However, for such legal misadventure resulting in wastage of precious judicial time of the High Court, which could have been better spent answering the call of justice raised by the teeming millions, we impose costs of Rs.1,20,000/- on the appellant. Such cost shall be deposited within 6 weeks with the Registry of the High Court, to be utilised as follows: i. Rs.40,000 for juvenile welfare in a manner to be decided by the Juvenile Justice Monitoring Committee; ii. Rs.40,000 for welfare of the Advocate-Clerks in a manner to be decided by Hon’ble the Acting Chief Justice, and; iii. Rs.40,000 for legal aid in a manner to be decided by the High Court Legal Services Committee. Appeal allowed. Issues Involved:1. Validity of the mortgage by deposit of title deeds.2. Interpretation and implications of the Agreement dated 24.06.2000.3. The correctness of the Division Bench's findings in the First Impugned Order.4. The appellant's non-representation in the appeal before the Division Bench.5. The Second Impugned Order's dismissal of the appellant's application to set aside the First Impugned Order.6. Appropriate rate of interest on the amount claimed by the appellant.7. Condonation of delay in filing the appeals.Detailed Analysis:1. Validity of the Mortgage by Deposit of Title Deeds:The Single Judge concluded that the respondent had agreed to create an 'equitable mortgage by depositing the title deeds.' This finding was based on the Agreement dated 24.06.2000, which noted that the respondent owed Rs.11,00,000 to the appellant and handed over title deeds as security. The Supreme Court affirmed this view, stating that the Agreement constituted a mortgage by deposit of title deeds under Section 58(f) of the Transfer of Property Act, 1882. The Court emphasized that the essential requisites of an equitable mortgage were met: a debt, a deposit of title deeds, and an intention that the deeds shall be security for the debt.2. Interpretation and Implications of the Agreement Dated 24.06.2000:The Agreement was the root of the dispute, noting the respondent's debt and the deposit of title deeds as security. The Division Bench had erred in concluding that the Agreement did not create a mortgage. The Supreme Court clarified that the Agreement was not merely an agreement to sell but was intended to secure the debt through the deposit of title deeds, thus creating a mortgage.3. The Correctness of the Division Bench's Findings in the First Impugned Order:The Division Bench's First Impugned Order was found to be legally erroneous. It had incorrectly concluded that the plaint averments were self-contradictory and did not make out a clear case of mortgage. The Supreme Court noted that the Division Bench failed to account for Section 58(f) of the Transfer of Property Act and overlooked the fact that the respondent had admitted to executing the Agreement and depositing the title deeds.4. The Appellant's Non-Representation in the Appeal Before the Division Bench:The appellant contended that he was not represented in the appeal due to a lack of notice. The Division Bench proceeded with the appeal in the appellant's absence, accepting the respondent's averments as correct. The Supreme Court noted that the appellant's non-representation was due to a misunderstanding regarding the scope of the vakalatnama given to his counsel. The Supreme Court found this plea 'fantastic' and rejected it, but it still set aside the First Impugned Order on other grounds.5. The Second Impugned Order's Dismissal of the Appellant's Application to Set Aside the First Impugned Order:The Division Bench had dismissed the appellant's application to set aside the First Impugned Order and restore the main appeal for fresh hearing. The Supreme Court found no legal infirmity in the Division Bench's dismissal of this application. However, since the First Impugned Order was set aside, the effect of the Second Impugned Order was nullified.6. Appropriate Rate of Interest on the Amount Claimed by the Appellant:The Single Judge had allowed interest at the rate of 36% per annum, which the Division Bench found excessive. The Supreme Court agreed that 36% was excessive and reduced the interest rate to 12% per annum, running from 24.06.2000 until the date of realization.7. Condonation of Delay in Filing the Appeals:The Supreme Court condoned the delay in filing the appeals, taking a liberal approach to serve the cause of justice. The delay of 589 days against the First Impugned Order and approximately 84 days against the Second Impugned Order were condoned, subject to the payment of costs of Rs.20,000 by the appellant to the respondent.Conclusion:The Supreme Court set aside both the First and Second Impugned Orders. The judgment dated 01.04.2010 passed by the Single Judge was restored with a modification to reduce the interest rate to 12% per annum. The appellant was directed to pay costs of Rs.1,20,000 for the legal misadventure, to be utilized for juvenile welfare, welfare of Advocate-Clerks, and legal aid. The appeals were allowed in these terms, and the delay in filing the appeals was condoned, subject to the payment of costs.