Mathew Mathew vs Alexander Muthalali

T.S. Krishnamoorthy Iyer, J.—The legal representative of the defendant is the appellant. The defendant executed Ext. D-2 otti dated 10-6-1959 in respect of the plaint property for Rupees 2500/- in favour of Captain Common. A portion of the building included in Ext. D-2 was given into the possession of the mortgagee. The mortgagee assigned the otti right to Sosamma by Ext. P-2 on 14-2-1963 who assigned the same to the plaintiff by Ext. P-3 dated 19-11-1963. The plaintiff alleged that whatever possession of the plaint property he had, has been surrendered to the defendant. The suit is instituted for recovery of the mortgage money with interest at the rate of 5% per annum from the date of suit.

Ext. D-2 which is the original mortgage deed was produced by the defendant. Ext. P-l is a registration copy of Ext. D-2.

It was contended by the defendant that the amount due under Ext. D-2 was discharged by him. He produced Ext. D-1 receipt" dated 23-9-1962 to prove the plea of discharge. According to the defendant, Ext. D-2 was handed over to him by Captain Oommon along with Ext. D-l. The Courts below concurrently found that Exhibit D-l is not genuine, the discharge pleaded by the defendant is not true, Ext. D-2 was not returned to the defendant as stated by him but was obtained by her surreptitiously. Counsel appearing for the appellant did not rightly challenge these concurrent findings as they are based on pure appreciation of evidence.

The grounds raised in the second appeal are that the suit for recovery of the mortgage-money is not maintainable as there is no covenant in Ext. D-2 for the repayment of the mortgage-money and it is barred by time.

Ext. D-2 is dated 10-6-1959 and the suit was instituted on 18-8-1964. The suit is for realisation of the mortgage-money by the sale of the mortgaged properly and also from the defendant. Though the suit is within 12 years from the date of Ext. D-2 it is beyond three years from its date.

Ext. D-2 is an Otti Adharam. There was no plea that the transaction evidenced by Ext. D-2 is not an otti. In Exhibit D-2 there is neither a personal covenant to repay the mortgage money nor a provision enabling the mortgagee to recover the mortgage money by the sale of the mortgaged property. There is only an indemnity clause enabling the mortgagee to realise any loss arising from any undisclosed encumbrance in the mortgaged property.

Counsel for the appellant therefore contended relying on Section 68 of the Transfer of Property Act and the decisions in Manimala Devi Vs. Indu Bala Debya and Others, , and Kunju Karthiyaynni v. Parameswaran Achari 1971 KLJ 51 that the right of the mortgagee to sue for mortgage money can arise only from the personal covenant to repay implied in Ext. D-2 which is an Otti and since the suit is instituted beyond three years from the date of Ext. D-2 it is barred under the Limitation Act of 1963.

In Manimala Devi Vs. Indu Bala Debya and Others, , Shah, J., referring to Section 68 of the Transfer of Property Act observed:

''The right conferred by Section 68 is again not a right to enforce the mortgage but a right to sue for the mortgage money on the personal covenant or to claim compensation when the mortgagee is deprived of his security. A suit for enforcement of the personal covenant to pay the mortgage money when the mortgagor has bound himself to repay the same is governed by Article 116 of the Limitation Act. Similarly the right to sue where the mortgagee is deprived of the mortgage security or where he is not secured in his possession of the mortgaged property or where possession is not delivered to him as agreed, the claim maintainable by the mortgagee is one for compensation and the period of limitation for a suit to recover the mortgage money is governed by Article 120 of the Limitation Act from the date of destruction or deprivation of the mortgage security or possession and not from the date when the mortgage money is repayable: Unicha-man v. Ahmed ILR (1898) Mad 242

In 1971 KLJ 51 Justice Poti construed the mortgage which was sought to be enforced in that suit as a usufructuary mortgage with a personal covenant to pay. It was there rightly overruled that a mere personal covenant to pay will not confer upon the mortgagee the right to enforce the mortgage and realise the mortgage money by the sale of the mortgaged property. At page 53 the learned Judge observed:

"Learned counsel for the plaintiff would urge that Section 68(1) confers a right to claim the mortgage money and once such right is conferred, the right is to be worked out by sale of the mortgaged property. I am afraid this is not a correct understanding of Section 68. If what is conferred by that Section is only a right in the nature of claim to compensation, there is no question of either a charge on the mortgaged property being available or a right of sale of the mortgaged property being conferred by that Section".

Clause (a) of Section 68(1) reads:

"The mortgagee has a right to sue for the mortgage in the following cases and no others, namely:--

(a) Where the mortgagor binds himself to repay the same;"

The said covenant is a personal covenant to pay the mortgage-money distinguished from a covenant to enforce the mortgage or to pay from out of the mortgaged property. In a usufructuary mortgage or a mortgage by conditional sale there is no personal liability to pay implied in the contract between the parties, whereas in other mortgages the law presumes a personal covenant to pay unless there is something to the contrary in the terms of the mortgage deed. According to the definition of "usufructuary mortgage" in Section 58(d) of the Transfer of Property Act there is no personal liability on the part of the mortgagor to repay the mortgage money to the mortgagee. Consequently the mortgagor cannot sue the mortgagee for recovery of the mortgage debt. There is a difference of opinion as to whether the existence of a personal covenant to pay prevents a mortgage from being a usufructuary mortgage and whether it is an anomalous mortgage within the meaning of Section 58 of the Transfer of Property Act. It is not necessary to express an opinion on this aspect. Suffice it to say that there is a difference of opinion on this question and Justice Poti has not expressed himself on this point in 1971 KLJ 51

Mulla in his Commentaries on the Transfer of Property Act, 5th edition, has observed at page 401:

"Before the amending Act of 1929 the definition of anomalous mortgages was embodied in Section 98 and it excluded mortgages which are a combination of a simple mortgage and an usufructuary mortgage, or of an usufructuary mortgage and a mortgage by conditional sale. Under the definition inserted as Clause (f) of Section 58 it is a mortage which does not fall within any of the other five classes enumerated. The definition therefore includes simple mortgages usufructuary and mortgages usufructuary by conditional sale in the term anomalous mortgage. Even before the amendment these combinations of the simple forms were sometimes described as anomalous mortgages.

Anomalous mortgages take innumerable forms moulded either by custom or the caprice of the creditor--some are combinations of the simple forms, others are customary mortgages prevalent in particular districts, and to these special incidents are attached by local usage. Such are the kanom, otti, and peruartham mortgages of Madras and the san mortgage of Gujarat".

Justice Poti in 1971 KLJ 51 interpreted the mortgage the nomenclature of which is otti as a usufructuary mortgage containing an implied personal covenant to pay. The question whether it is an anomalous mortgage coming u/s 58(g) of the Transfer of Property Act was neither raised nor construed.

That otti is a customary form of mortgage prevalent in Kerala was not disputed at the Bar. If an otti transaction is construed as an anomalous mortgage the mortgagee thereunder has got a statutory right of sale of the mortgaged property for the realisation of the mortgage money under Sec. 67 of the Transfer of Property Act. Whether an otti is an anomalous mortgage or not a covenant enabling the mortgagee to enforce the mortgage and realise the mortgage money by sale of the mortgaged property is always implied therein as a term of the contract. Section 67 of the Transfer of Property Act refers to the remedy of the mortgagee against the property mortgaged while Section 68 of the Transfer of Property Act refers to the personal remedy of the mortgagee. That Section provides for two classes of suits. The suit contemplated by clause (a) of Section 68 is a suit to enforce the personal covenant expressed or implied in the mortgagee while the suits provided by clauses (b) to (d) are in the nature of claims for compensation when the mortgagee is deprived of his security. There is nothing in Section 68 of the Transfer of Property Act to bar the mortgagee from enforcing the mortgage if there is a covenant in the mortgage deed.

In Bhagavathi Narayani v. Valliamma Kaliyamma, 14 TlR 218 the question considered was whether under the cuslomary law of Travancore a mortgagee in a transaction called otti is entitled to recover the mortgage amount from the mortgagor and from the mortgaged property in the absence of an express covenant in the deed of mortgage for the repayment of the said money. The headnote of the decision reads:

"According to the customary law of Travancore a usufructuary mortgagee is, as a rule, entitled to recover his mortgage amount from the mortgagor or the mortgaged property, even though there is no express covenant in the mortgage deed for the repayment of the mortgage amount".

The learned Judges had observed:

"There is no commercial transaction among the people of Travancore which so frequently comes before the courts as that of mortgages in its various forms and it is well known that the forms of mortgage known as Otti, Otti and Kuzhikanom and Kanom are peculiar to the West Coast of India and based essentially on custom.

* * * The term Otti in Exhibit A implies that it was a mortgage to which all the incidents of an Otti apply and no special covenant for repayment by the mortgagor was necessary. In fact, no such covenant is ever inserted in a Malabar mortgage. We therefore, hold that according to the customary law of the land the plaintiff is entitled to recover his money from the property mortgaged and his costs hi both courts".

The above decision was followed in Narayanan Krishnan v. Kanaku Tampi Chempakaraman Thanuvan 16 TLR 35 at p. 38, Where the learned Judges observed:

"............... but, here according to the customary law of Travancore, a usufructuary mortgagee is, as a rule, entitled to recover, his money from the mortgagor or the mortgaged property even though there is no express covenant for the repayment of the mortgage amount".

In Idichandi Mathai v. Narayanan Unnithan, ATR 1962 Ker 27 Madhavan Nair, J., pointed out:

"An otti as understood in this State is an anomalous possessory mortgage as defined in the Transfer of Property Act, in that the mortgagor under it is personally liable for the mortgage amount and the mortgagee is to enjoy and appropriate all the profits of the property without any liability to account".

The learned Judge did not have the occasion to consider whether the otti implies a covenant for the enforcement of a mortgage by the sale of the mortgaged property.

In Ammal Nadachi v. Kopillan Nadar, 1954 KLT 795 = AIR 1955 TC 207 a decision of the Travancore-Cochin High Court, T. K. Joseph, J., pointed out:

"Ext. A is a deed of otti which is neither a simple mortgage nor a usufructuary mortgage as defined in the Transfer of Property Act. It properly comes under the category of anomalous mortgages. While usufructuary mortgages do not impose a personal liability on the mortgagee, the customary law of Travancore is that a person who borrows money on otti is personally liable for the amount as in the case of a hypothecation bond. In other words, all the elements of a hypothecation bond are present in an otti transaction and in addition possession of the property secured is given to the mortgagee so that he may take the profits in lieu of interest".

It is clear from the above discussion that Ext. D-2 being an otti a covenant to enforce the mortgage can be implied and the suit for recovery of the mortgage money by the sale of the mortgaged property is therefore maintainable. The suit for the said relief is admittedly not barred by limitation.

Then the only question is whether the suit based on the personal covenant is barred. The suit was instituted on 18-8-1964. The Limitation Act of 1963 came into force on 1-1-1964. Article 116 of the Indian Limitation Act, 1908 would govern the case as the personal liability arose out of a contract registered in writing. On 1-1-1964 when the Limitation Act, 1963 came into force the claim to enforce the personal remedy had not become barred under the Indian Limitation Act, 1908. In view of Section 30(a) of the Limitation Act, 1963 the prayer for personal relief is also not barred. The second appeal is therefore without merit. I dismiss the same. I make no order as to costs.

No leave.