Devukutty Amma and Others vs Madhusudhanan Nair

K.G. Balakrishnan, J.—Defendants in a suit for money due under a pronote are the Appellants. The suit was filed by the Official Receiver appointed by the Court to manage the assets of M/s. M.N. Venkita Subramannia Iyer and Sons Bankers, Alathur which was adjudicated as insolvent by the Order of the Sub Court, Palghat in I.Ps. 3 and 4 of 1976. The Plaintiff alleged that on 5th March 1975 Defendants borrowed Rs. 55,335 from M/s. M.N. Venkita Subramannia Iyer and Sons and executed a pronote, and as collateral security for this debt they mortgaged certain properties by deposit of title deeds. Plaintiff contended that the Defendants had not paid any amount towards the liability, and, therefore, the Plaintiff after obtaining sanction from the Court filed the suit for realisation of the amount.

These Appellants-Defendants contended that the suit was not maintainable and the Plaintiff was not entitled to file a suit in his capacity as Official Receiver and these Defendants had not borrowed any amount from M/s. M.N. Venkita Subrammannia Iyer and Sons on 5th March 1975 as alleged in the plaint. It is contended that deceased Kunhiraman Nambiar, the husband of the first Defendant and father of Defendants 2 and 3, had some transactions with this banking concern and amounts were due from him at the time of his death. After the death of Kunhiraman Nambiar, these Defendants in their capacity as legal representatives had executed pronotes in favour of the banking concern for amounts due from deceased Kunhiraman Nambiar and the Defendants further contended that they believed that the suit promissory note must have been the last pronote executed by them. Defendants denied having handed over the title deeds of their property to the banking concern. The mortgage by deposit of title deeds is denied. It was also contended that the suit claim was barred by limitation.

The Court below framed six issues and it was held that these Defendants had executed the pronote and it was supported by consideration and also that they had executed mortgage by deposit of title deeds and thus the suit was decreed as prayed for by the Plaintiff.

We heard the counsel for the Appellants and the counsel for the Respondents. The argument advanced by the Appellants counsel are that the suit pronote is not supported by consideration and there was no mortgage by deposit of title deeds and the interest allowed by the Court below was excessive.

The following points arise for consideration:

(i) Whether the suit pronote is supported, by consideration?

(ii) Whether there was mortgage by deposit of title deeds? If so, whether that transaction was invalid for want of registration?

(iii) To what reliefs?

Point No. 1:

The counsel for the Appellants contended that Ext. A-2 pronote is not supported by consideration as these Defendants had not received any cash on the date of execution of the pronote. It is argued that even if it is proved that these Defendants executed a pronote, it must have been towards the liability of deceased Kunhiraman Nambiar towards M/s M.N. Venkita Subramannia Iyer and Sons and therefore, it is not enforceable under law as it lacked the requisite ingredients as envisaged u/s 25(3) of the Indian Contract Act. It is proved that the Defendants did not receive any cash consideration on the date of execution of the pronote. A summary of the evidence of P.W. 1 on this aspect is that the husband of the first Appellant was a big business man in Vadakara. He had business transactions with M/s. M.N. Venkita Subramannia Iyer and Sons and Kunhiraman Nambiar died about 20 years back and after his death the business collapsed and Ext. A-2 pro note was executed as renewal of the debts inclusive of Principal and interest. He further stated that he was not aware of the extent of the Principal and interest. D.W. 1 also gave evidence and admitted that the second Defendants executed Ext. A-2 pronote. This is what he has said about Ext. A-2:

Ext. A-2 M.N. Subramannian and Sons Bankers Pro-note Ext. A-2 Bankers- Pro-note ,...

(Ext. A-2 is the pronote we, the Defendants, had executed in favour of bankers, M.N. Subrammanian and Sons. Ext. A-2 was executed for the amount that was due on the date of that pronote.)

The argument of the Appellants'' counsel is that Ext. A-2 pronote was executed for the liability of deceased Kunhiraman Nambiar, and as Kunhiraman Nambiar has died in 1965, Ext. A-2 pro note executed on 5th March 1975 must have been for a time barred debt and therefore, it is unenforceable. At the outset, it is to be noticed that the Appellants had no case that the pronote was executed towards the consideration which was time barred. Neither in the written statement nor at time of evidence, these Appellants contended that the debts were due from Kunhiraman Nambiar and these debts had become time barred and these Defendants executed Ext. A-2 pronote in respect of that time barred debt. If such was the contention, definitely Section 25(3) of the Indian Contract Act would come into play and these Defendants being not the agent of the deceased Kunhiraman Nambiar, any promise made in writing by these persons to pay time barred debt will not make them liable in view of Section 25(3) of the Indian Contract Act. In order to attract the provisions contained in Section 25(3) of the Contract Act, there must be a promise in writing signed by the persons to be charged with or by his agent, generally or specially authorised, on that behalf to pay in wholly or in part in respect of a time barred debt. So far as these Appellants are concerned, they have no case that they executed Ext. A-2 pronote in consideration of a time barred debt allegedly due from deceased Kunhiraman Nambiar, and as such the argument of the Appellants'' counsel that the suit should fail u/s 25(3) of the Act has no force and the decision cited by the Appellants'' counsel reported in Perumayammal and Another Vs. Chinnammal, , and Pestonji Manekji Mody Vs. Bai Meherbai, have no application. They are cases where the person other than agents executed pronotes in consideration of debt payable by other persons which was time barred at the time of execution of the note.

From the evidence adduced in this case, it is clear that Ext. A-2 pronote was executed not in respect of any time barred debt allegedly due from deceased Kunhiraman Nambiar. Neither in the written statement nor at the time of evidence the Defendants had a case that they executed the suit pronote for a time barred debt. The evidence in this case would only indicate that at the time of execution of Ext. A-2 pro note, these Defendants did not receive any cash consideration. They must have executed the suit pronote as a renewal of earlier pro notes executed by them. The evidence also shows that the Defendants had been making occasional payments.

Under Indian Law, there could be a contract based on past consideration. The very definition of ''consideration'' given in Section 2(d) of the Indian Contract Act indicates that past consideration is valid. The relevant words in the definition are:

...the promisee, or any other person, has done or abstained from doing such...act, or abstinence of promise is called a consideration for the promise.

These terms indicate that past consideration is good consideration and it is a deviation from the general principle of Common Law wherein the past consideration is not treated as good consideration. The use of perfect tense in the definition of consideration makes an exception to the general rule under the English Law. From the evidence of D.W. 1, extracted above, it is clear that these Defendants executed the pronote for the amount due from them towards M/s M.N. Venkita Subramannia Iyer and Sons. Even though no amount was received on the date of execution of Ext. A-2, pro note is supported by valid consideration.

In this case, the Defendants did not allege that they executed the pro note for a time barred debt due from the deceased Kunhiraman Nambiar. The Plaintiffs are entitled to invoke the aid of presumption u/s 118 of the Negotiable Instruments Act. As the Defendants have admitted the execution of the pronote. it is for them to establish that the pronote is not supported by valid consideration. If they failed to show that, it is to be held that the pronote is supported by consideration. There is no evidence that Ext. A-2 pronote lacked consideration.

Point No. 2:

In this case, the Plaintiffs contended that the Defendants had executed mortgage by deposit of title deeds. The Defendants denied having executed any mortgage by deposit of title deeds. The Defendants further contended that even if it is held that there was a mortgage by deposit of title deeds, Ext. A-3 document is not registered and therefore, the mortgage is not enforceable against the Defendants. The requisites of a valid mortgage by deposit of title deeds are that, there must be a debt, that there must be deposit of title deeds and the party who is making deposit of title deeds had an intention that the title deeds shall be the security for the debt. A mortgage by deposit of title deeds need not require any writing and if that is a written document, the same would require registration. The contention of the Defendants in this case is that Ext. A-3 is a document which creates a mortgage by deposit of title deeds and as it is not registered, it is not enforceable. We are not inclined to accept this contention. Ext. A-3 is only a letter written by the first Defendant in favour of M/s. M.N. Venkita Subramannia Iyer and Sons. In the letter it is stated that she has authorised her son to deliver the title deeds of her properties to the addressee. It is clear that Ext. A-3 is not a document by itself which creates a mortgage by deposit of title deeds. It only evidences the transfer of document from Defendants to M/s M.N. Venkita Subramannia Iyer and Sons. The fact that the Plaintiff could produce the document and the execution of Ext. A-2 pro note by the Defendants it is contended are relevant circumstances to prove that there was mortgage by deposit of title deeds. There is no written document for this mortgage. The law of registration has no application, and it is not proved that there was mortgage by deposit of title deeds.

Point No. 3:

The counsel for the Appellants contended that the suit was decreed with future interest at the rate of 12 per cent per annum and as there is no evidence to show that this was a commercial transaction, granting of future interest in excess of 6 per cent per annum is illegal in view of Section 34 of the Code of Civil Procedure. D.W. 1 was specifically asked whether the amount was obtained for commercial transaction. D.W. 1 had deposed that the amount was obtained for business purposes. Therefore, the Court below was justified in granting future interest at the rate of 12 per cent per annum.

The suit has been rightly decreed as prayed for. We see no merit in the appeal. The appeal is dismissed with cost.