K. Thirumalai Nambi vs Maharaja Pillai

S. Mohan, J.—The plaintiff is the appellant before me. The short facts in the second appeal are as follows:

The plaintiff preferred O.S. No. 343 of 1970 on the file of the District Munsif''s Court, Nagercoil, for recovering the mortgage amount under

Exhibit A-1, dated 14th November, 1968, which was executed in his favour for a sum of Rs. 1,000. In and by the said document, the defendant

undertook to pay interest and principal, separately and allow the plaintiff to sue for interest that has accrued, for three consecutive months. Interest

of Rs. 25 was paid only for one month, and thereafter, there was default to pay the same upto 14th October, 1969, which led to the filing of Small

Causes Suit No. 384 of 1969 and obtaining of a decree for the interest alone. Hence, the present, suit for the recovery of the subsequent interest

and the entire principal outstanding.

The defendant admitted the execution of the hypothecation bord and also the Small Causes Suit and the decree thereon. But according to him,

the present suit was barred by the provisions of Order 2, Rule 2 of the Code of Civil Procedure.

The learned District Munsif upheld the plea of the defendant, and dismissed the suit. On appeal in A.S. No. 427 of 1971, the learned District

Judge, Kanyakumari at Nagercoil, confirmed the findings of the trial Court. Hence, the present second appeal.

The only question that arises for my determination is, whether the plaintiff could be non-suited by the application of Order 2, Rule 2, Code of

Civil Procedure.

Mr. T.R. Mani, learned Counsel for the appellant contends that this is an extremely hard case and his client could succeed, if he is able to touch

the sympathetic chord of the Court, and that could well be done only if a proper background of Order 2, Rule 2, CPC is provided. With this end

in view, he cited many rulings.

Mr. Section Padmanabhan, learned Counsel appearing as amicus curiae in countering these arguments submits that however sympathetically

viewed, the appellant. cannot succeed in view of the categoric provision of Order 2 Rule 2, Code of Civil Procedure, since upon the failure of the

mortgager to pay interest for three consecutive months, both the principal and the interest became due. Under such circumstances, the mortgagee

had sued for interest alone. The latter suit for recovery of principal would be barred in view of the said provision. The cases cited are clearly

distinguishable and the ruling which has, a direct bearing On the issue involved in this case is Ckunilal v. Amir Ahmedi Bee (1958) 2 A. W.R. 286 :

(1958) A. L.T. 275 : AIR 1958 AP 608.

In the case on hand, Exhibit A-1 reads as follows:

According to the-learned Counsel for the appellant, by a reading of this document it could easily be seen that (i) option has been given to the

mortgagee to recover either the interest or the principal according to his convenience, and(ii) there is a personal covenant by the mortgagor for the

payment of interest alone. Thus according to him in so far as the previous S.C.S. No. 384 of 1969 was not for the enforcement of the

hypothecation bond, and was only on the personal covenant, the present suit for the enforcement of the mortgage cannot be said to be barred by

Order 2, Rule 2, Code oaf. Civil Procedure. Moreover, where the mortgagee sues for the recovery of-the mortgage amount and for intertest there

being two different causes of action, there is no bar under Order 2, Rule 2, Code of Civil Procedure.

The fallacy in the argument of Mr T.R. Mam lies in this: there is no personal covenant for the payment of interest alone, because, all that Exhibit

A-1 says is:

By this, it is meant that in the, process of recovery of the mortgage amount, or the interest, if the mortgagee sustains any Joss, that will be

compensated personally or from the other properties of the mortgagor.

(2) The vital clause in the document is that if interest is not paid consecutively for a period of three months, the mortgagee has option to sue either

for the principal or for interest, at his choice, since the wording is:* * *

From this it is clear, that by the non-payment of the interest for a period of three months, the entire mortgage amount becomes due. Thus, the

construction sought to be placed by Mr. T.R Mani on the wording of Exhibit A-1 is incorrect.

I will now proceed to consider the case-law.

In Yashvani v. Vitkal ILR (1897) Bom. 267, it was held:

The breach of covenant in a mortgage bond to pay interest each year which covenant is not confined to the fixed period of the mortgage and is

distinct from and independent of the claim of the mortgagee to recover the principal sum, and the performance of which is secured in a different

manner, gives rise to a distinct cause of action which can be sued upon without suing for the principal, and a decree obtained on such bond for

overdue interest does not, u/s 43 of the CPC (XIV of 1882), bar a subsequent suit to recover the principal and interest by sale of the mortgaged

property.

This case is clearly distinguishable, because there is no distinct and independent claim of the mortgagee to recover the principal sum.

In Mukammad Hafiza Mirza Muhammad Zakariya (1922) 42 M.L.J. 248 : 49 I.A. 9 : AIR 1922 P.C. it was held thus:

Now the whole question depends upon considering whether the terms of Rule 2, Order 2 do really bar the plaintiffs from the relief that they

seek, and no one would be anxious to stretch or strain the language of that rule in order to cover a case where, if it be made applicable, it is

obvious that the plaintiffs may suffer a substantial wrong. The rule runs in these terms:

(I) Every suit shall include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action; but a plaintiff may relinquish

any portion of his claim in order to bring the suit within the jurisdiction of any Court.

There are other provisions of the Order to which reference need not be, made, because, in their Lordships opinion, the exact provision of Rule

2, Sub-section (1), which has been read, covers and fits the present dispute. What was the cause of action that the plaintiffs possessed when the

proceedings were first instituted? It was the cause of action due either to the fact that the interest had been unpaid for more than six months, or that

the three years had elapsed, and the principal was also unpaid, and in either case they could have sued for realisation, to provide for the whole

amount secured by the deed.

The plaintiffs now purported to proceed under Clause 2 of the deed, but even in that case the non-payment of the interest was the sole cause

upon which they were entitled to ask either for the limited, relief that was sought or the larger reiiei which they abstained from seeking. It is also

important to point out that the only relief that could be sought in both cases was realisation of the mortgage security, for the mortgage was a simple

mortgage containing no express covenant for the Payment of the principal and the interest

The decision of the Privy Council concludes the case against the appellant.

Again in Kishan Narain v. Pala Mal (1923) 44 M.L.J. 123 : 72 Ind.Cas. 187 : 50 I.A. 115 : AIR 1922 P.C. 412 the Judicial Committee

observed thus:

That Rule 2 of Order 2 of the CPC is the relevant Section of the Code applicable to the dispute is not in contest. The whole question is what does

it mean? It does not appear to their Lordships that if the mortgage had provided, as mortgages always do in this country, for an independent

obligation to pay the principal and the interest, then in a suit brought to obtain a personal judgment in respect of the interest alone the rule would

have prevented a subsequent claim for payment of the principal. In such a case the cause of action would have been distinct. The matter is,

however different if the non-payment of the interest causes the principal money to become due, as in that case the cause of action the non-payment

of the interest, gives rise to two forms of relief which the Code provides shall not be split. This is illustrated by the present suit

In my view, the position is exactly the same.

B.R. Sawmy Rao Vs. F.H. Wilson, The Official Assignee of Madras, contained an independent covenant for payment of interest. On the

construction of that instrument, following the ruling of the Privy Council, it was held at page 476:

Now, what of this instrument? It seems to me perfectly clear that there is an independent covenant for the payment of interest and that the principal

actually becomes payable not on failure to pay a current instalment of interest but on failure to comply with the demand to pay the interest and

interest and principal due together. There is no proviso here, which I quite agree might make all the difference, that the failure to pay instalment of

interest shall make the whole principal amount due.

This decision, therefore, does not help the appellant.

In U.M. Sivasubramania Pillai Vs. Nagappa Pillai, , the mortgage deed contained a provision to pay interest at the end of each year, and the

principal at the end. of two years. The stipulation was, on default of payment of interest, the entire amount would become due, when required by

the mortgagee, and on default of payment of interest a suit for interest alone was filed. Subsequently, a suit was filed for principal and interest

accrued thereafter. Under such circumstances, it was held that Order 2, Rule 2 was not a bar, since the terms of the document clearly showed that

there was to be a demand to enable the mortgagee to claim the payment of the principal irrespective of the period of two years fixed in the

document and as it was admitted that no demand was made for the principal sum the principal did not become payable at the expiry of the first

year.

In the case on hand, the question of making a demand does not arise at all.

In J.P. Rego Vs. Phillip Tauro and Another, a review of very many decisions, it came to be held at page 591 as below:

The distinction between a right and privilege is of fundamental importance and this must not be overlooked in construing the word ""entitled"" in

Order 2, Rule 2. The plaintiff, that rule says, is bound to include the whole of the claim which he is entitled to make, in other words, to which a

right has accrued. The point then is, before the first suit was filed, did a right accrue to him to demand the whole amount? The matter may be put

somewhat thus: The plaintiff has an option to enforce the clause or not at his pleasure. It is open to him to avail himself of that option or to waive it

and there is a third alternative namely, it is equally open to him not to make election. He may by act or word show that he elects to avail himself of

the benefit, and then he determines his election for ever. He may similarly indicate that he waives the option, and in that case again, he cannot

afterwards change his mind. Then there is the third_ alternative, where he makes no election, retaining the right either to exercise the power or to

waive it and this he may retain till the suit is filed. Construing Order 2, Rule 2 in the light of this Principle, it Cannot be said of a person, that on the

date of the first suit he became entitled to sue for the whole amount, unless he had previously elected by some word or act to take advantage of the

default ""clause. If he had previously done nothing, that is, had made no election, the act involved in bringing the first suit for a single instalment

amounts to a waiver on his part of the benefit -reserved under that clause. If again, after the default has occurred, he keeps the question open and

does-nothing, but finally sues for the whole amount, the fact that he has so sued shows that he has waived the benefit reserved to him under the

contract.

In the instant case, as seen above, the right to sue for the entire mortgage amount accrued due on the failure to pay interest for three months and

that is the acid test.

In Lalta Prasad Vs. Puran Lal, , it was held that where under the terms of the mortgage, the mortgagee is entitled to sue the mortgagor

personally for the unpaid interest and the mortgagee sues the mortgagor for such interest praying for a personal decree, without seeking any relief

against the mortgaged property, his subsequent suit for sale in enforcement of the mortgage will not be barred by anything said in Order 2, Rule 2.

By a reading of Exhibit A-1 it is clear that there is no personal covenant to pay interest. This ruling is also distinguishable.

On the same reasoning Ramnatk v. Karnindan AIR 1963 Raj. 160 should also be held in applicable since in that case, there was an

independent and distinct obligation on the part of the mortgagor to pay interest, even if the principal had not fallen due.

The question that arose in Puran Chand v. Har Parshad AIR 1935 Lah. 672 was whether the right of the mortgagee to recover money from

the mortgagor personally and the right to realise the security were independent and distinct causes of action. It was held that they were independent

causes of action. But, here no such question arises.

Turning to Chunnilal v. Amir Ahmedi Bee (1958) 1 A.W.R. 286 : AIR 1958 AP 608 I find, as rightly contended by Mr. Section

Padmanabhan, that that is the authority directly on the point. The facts of the case were as follows:

The defendants on 27th May, 1942'' through a registered mortgage deed mortgaged the suit property with the plaintiff for a sum of Rs. 11,000

agreeing to pay the mortgage amount together -with interest payable every month and compoundable every year within five years with a further

stipulation that if they failed to pay interest for six months the plaintiff would be entitled to recover the arrears of interest or the whole of the amount

notwithstanding the stipulation for payment in five years. The defendants made default in payment of the monthly instalments of interest. The plaintiff

filed a suit on 24th June, 1950 for recovery of interest amount. The suit was decreed ex parte. Thereafter the plaintiff filed the present suit for

recovery of the principal amount on 1st September, 1952.

Under these circumstances, it was held:

The previous suit which was filed by the plaintiff for recovery of the interest amount was instituted after the expiry of the stipulated period of five

years. Inasmuch as at the time of the filing of the previous suit the principal amount had already become due, it was obligatory on the plaintiff to

have included the claim for the principal amount also along with the claim for interest. As the plaintiff had not included this amount in the previous

suit, the present suit for the recovery of the principal amount would be barred by-Order 2, Rule 2. A bare mention by the plaintiff in his earlier suit

of the reservation of his right to file a separate suit for principal and the defendant''s failure to deny the same in. that suit could not give the plaintiff a

fresh cause of. action creating a separate contract.

A feeble attempt Was made by Mr. T.R. Mani, learned Counsel for the appellant that in view of the provisions of Order 34, Rule 14, Code of

Civil Procedure, which according to him, must be construed as an exception to Order 2, Rule 2 it should be held that the present suit was

maintainable. The object of Order 34, Rule 14 is, to prevent the mortgagee from bringing to sale the bare equity of redemption in execution of a

money decree, which he may have obtained in respect of a claim under the mortgage. Therefore, the contention of the learned Counsel that Order

34, Rule 14 is an exception to Order 2, Rule 2 is without any substance.

No doubt, it is a hard case. But, sympathetic consideration cannot override the well established principles adumbrated in the Code of Civil

Procedure. As ''laid down by the Privy Council in Kishan Narain v. Pala Mal (1923) 44 M.L.J. 123 : 50 I.A. 115 : 72 Ind.Cas. 187 ""it is the duty

of the Courts to interpret and carry into effect these rules uninfluenced by the consideration of the individual loss that may be occasioned by

disobedience of the provisions

In the result, I am unable to sec any error of law in the concurrent judgments of the Courts below. Consequently, the second appeal will stand

dismissed. However, there will be no order as to costs. No leave.

I thank Mr. Section Padmanabhan, who acting as amicus curiae, rendered valuable assistance in deciding this case.