Narayana Chettiar vs Rangaswamy Naidu and Others

M. Natesan, J.—In this Second Appeal by the plaintiff mortgagee in a suit for sale, the question involved is one of limitation. The mortgage is

a combination of a simple mortgage and an usufructuary mortgage, that is, a possessory mortgage containing a personal covenant for payment. The

mortgage deed is Exhibit A-l, dated 17th May, 1927, securing a sum of Rs. 1,000, under the terms of the mortgage the plaintiff mortgagee was to

enjoy the properties mortgaged in lieu of interest for a period of five years and the mortgagor undertook to repay the mortgage amount when

wanted in any year at the close of the agricultural season i.e., after the expiry of the period of five years and redeem the mortgage. It is stated that

on the date of the said mortgage itself, the mortgaged properties were leased by the mortgagee to the mortgagor for a period of five years, Exhibit

A-5 being the lease deed. According to the plaintiff, the mortgagor enjoyed the properties under the lease but paid only for three years. He

defaulted in the payment of rent thereafter and refused also to surrender possession of the properties to the plaintiff. However, it is only on 16th

October, 1959, the plaintiff, by notice demanded the mortgage money from the mortgagor. The suit claiming a sum of Rs. 2,530.75, principal and

interest due under the mortgage, was filed on 18th April, 1960. The plaintiff would have it that as he made the demand for the mortgage money

only on 16th October, 1959, the cause of action for the suit arose only on that date and that the suit filed within 12 years from that date was in

time. The contention has been that it is only on demand of the money that the money became due and payable under the mortgage. Both the

Courts below have negatived this contention and dismissed the suit.

There is no dispute before me that the mortgage deed contains a personal covenant to pay. Once in the deed a personal covenant could be

read, the mortgagee gets a right of sale. Section 67 of the Transfer of Property Act entitles a mortgagee, in the absence of a contract to the

contrary, at any time after the mortgage money has become due to him, and before a decree has been made for the redemption of the mortgaged

property or the mortgage money has been paid or deposited as provided in the Act, a right to obtain from the Court a decree that the property be

sold. Clearly, the suit for sale has been laid by virtue of the said provisions. Though Clause (a) of Section 67 provides that nothing in that section

shall be deemed to authorise any usufructuary mortgagee as such to institute a suit for sale, the mortgage under consideration, admittedly being not

usufructuary mortgage pure and simple, the suit for recovery of the money by sale is competent. I may here itself refer to Section 60 of the Transfer

of Property Act which provides for the exercise of the right of redemption by the mortgagor. This could be exercised at any time after the principal

money has become due. It is the common case of the parties that the relevant Article of the Limitation Act applicable to the suit is Article 132 of

Act IX of 1908. It reads:

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Description of suit. Period of limitation. Time from which period

begins to run.

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To enforce payment of money Twelve years. When the money sued

charged upon immovable for becomes due.

property.

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The starting point of limitation under Article 132 is when the money sued for becomes due. The question for consideration in this case, is when

the money became due under the personal covenant in the mortgage deed in question. It is admitted that on the expiry of the five year period

provided in the deed, the mortgagor would get the right to redeem, that is the mortgage money has become due for the exercise of the right of

redemption. What is contended for the plaintiff is that even though the mortgagor could redeem at any time, after the expiry of the five year period,

provided the right of redemption is exercised at the close of Chitrai month in any year, so far as the personal covenant is concerned, the money did

not become due under the personal covenant till a demand for the money was made. Counsel for the appellant lays stress on the expression "" when

you want"" referring to the mortgagee, that is, when wanted by the mortgagee in the clause providing for payment and redemption by the mortgagor

at the close of the agricultural season. The clause provides that on the expiry of the five year period, when wanted by the mortgagee in any year at

the close of Chitrai, the mortgagor shall pay the principal amount and redeem the usufructuary mortgage. According to the learned Counsel money

became due under the mortgage only when demand was made and in this case the plaintiff has made the demand only in October 1959, no doubt

more than 32 years after the execution of the mortgage deed.

In support of his contention, learned Counsel relied on the Secretary of State for India v. Prasad Bapuli ILR (1923) Mad. 259 : 44 M.L.J. 685.

My attention was drawn particularly to certain observations at pages 288 and 289 of the report. At page 289 it is observed : -

The question to be considered is whether the words '' on demand '' are mere words, or whether, '' looking at the whole document, it is really

intended that the demand should be made before the liability to pay arises.''

Earlier, it was observed:

According to the law of England when money is payable on demand and nothing further is said, it is payable at once and without demand and time

under the Statute of Limitations begins to run at once. The most common instance of the application of that principle are of money lent repayable

on demand or at request and promissory notes payable on demand.

The test, as pointed out in this decision, is whether the expression ''on demand'' used in an instrument are mere words or whether looking at the

whole document, it was really intended that the demand should be made before ever the liability to pay arises. Applying that test, it cannot, in this

case, be said that the liability to pay arose only on demand being made. The money became payable on the expiry of the five year period.

Admittedly, the mortgagor could redeem at any time after the expiry of the five year period. The provision as to redemption on payment of the

principal amount and the words''"" provided that the redemption should be at the close of the agricultural season on demand in any year "" should all

go together. If the contention of the learned Counsel for the appellant is to be accepted that the money became due under the instrument only on

demand, the mortgagee could by not making any demand, postpone redemption. The clause would then become a clog on redemption. But

learned Counsel concedes that it would be open to the mortgagor to redeem at any time and there is no covenant or prohibition against redemption

at any time after the expiry of the five year period, except for the provision that it must be at the close of the agricultural season. Clearly, the money

becomes due on the expiry of the five year period. Counsel would, however, state that viewed as a simple mortgage, money does not become due

till demand is made. But I am unable to split and read the clause that way. If the money had fallen due for redemption at the expiry of the five year

period equally, for the purpose of recovery of the money on the personal covenant, it should in the circumstances, be held to have fallen due at the

same time. Learned Counsel referred me to the decision in Karindan Kuttiassan and Another Vs. Kariadan Suppi and Others, . In that case the

intention to postpone the right of suit was, on the construction of the document, held very clear. The decision proceeded on the language of the

instrument and the Court was satisfied, on the construction of the document, that the parties intended that there should be a demand after the

creditor attained his majority. One other case that was relied on by the appellant is the decision of the Judicial Committee in AIR 1930 188 (Privy

Council) . There it was no doubt held that money did not become due and the cause of action did not arise until demarid for the payment of the

mortgage money was made by the mortgagee. But it will be seen that their Lordships of the Judicial Committee found, on the terms of the

document concerned, that there was no specific time fixed for the payment of the debt. It Was therefore, held that the money did not become due

until a demand was made. Here, clearly the document provides a five year period for redemption and the right of redemption arose on the

mortgage money falling due.

For the respondents reliance was placed on Lasadin v. Gulab Kunwar L.R. 59 IndAp 376 : 63 M.L.J. 187 : ILR (1932)7 Luck. 442. From this

judgment it is only necessary to extract the following observation at page 452:

They (their Lordships of the Judicial Committee) are not prepared to hold that the mortgagor could in this way take advantage of his own default;

they do not think that upon such default he would have the right to redeem, and in their opinion the mortgage money does not ''become due'' within

the meaning of Article 132 of the Limitation Act until both the mortgagor''s right to redeem and the mortgagee''s right to enforce his security have

accrued.

In Padmavathi Vs. Srimad Ananteswarar Temple and Others, , the term in an indemnity bond ran as fellows:

So the sum of Rs. 3,000 is retained with you (the vendee) till such time as a proper release deed exonerating the property from the liability under

the bond is obtained in your favour.. You should pay interest on the said amount of Rs. 3,000 at 3 1/2 per cent. per annum on the 14th June every

year and you should pay us the principal amount thus kept in suspense in your hands as soon as the release mentioned above is procured in your

favour.

The appellant therein filed the suit contending that for the purpose of limitation the money became due under Article 132, only on execution of

the release deed. This contention was accepted by the District Judge and in rejecting it this Court observed:

The interpretation of this clause accepted by the learned District Judge Would lead to the absurd result that if for some reason or other the party

interested in getting the release deed postpones or abandons such getting, the starting point of the period of limitation will be indefinitely postponed.

We entirely agree with Mack, J., when he says that this term in Exhibit A-2 (indemnity bond) was intended only for the benefit of the vendee. The

plaintiff in the suit, the appellant before me, could not take advantage of this clause by causing P.W. 1 to execute a release deed in 1942, nine

years after the period of limitation had run out, and then claim a new starting point of limitation from that date. The true principle is that the unpaid

purchase money became due, that is payable according to the true construction of Exhibit A-2, the moment the liability under Exhibit B-l Was

extinguished either by efflux of time or otherwise or by voluntary act of parties like execution of the contemplated release deed.

The learned Judges point out that the term ''when the money becomes due'' in Article 132 of the Limitation Act should be construed with

reference to the capacity of the charge-holder to collect the unpaid money. Applying that test, clearly in this case the appellant could have claimed

the principal amount immediately on the expiry of the five year period. Counsel for the respondent drew my attention to the decision in Pt. Gopi

Math v. Pt. Bhana Shankar yajnik (1954) A.L.J. 336. In that case the mortgage deed provided as follows:

When the creditor desires to demand money from us they may give us a six months'' notice, after the expiry whereof, it will be open to them to

take proceedings in Court according to law.

Construing this provision, a Division Bench of the Allahabad High Court held:

...therefore, we are satisfied that the intention of the parties was that the mortgage was not to be for a period. It was open to the mortgagor to pay

the mortgage amount at any time he liked. It was open to the mortgagee to claim . the amount immediately after the execution of the mortgage

deed. If, however, the mortgage money was claimed and was not paid, the mortgagee wanted to file a suit the deed provided that the mortgagee

would be entitled to file a suit on the expiry of the period of six months. This was merely to save unnecessary expenses being incurred in the filing

of the suit and to enable the mortgagor to arrange for the money and pay it up to the mortgagee. It cannot therefore be said that the mortgagee had

no cause of action to file a suit before the expiry of six months.

In the present case, for the convenience of the mortgagee, the clause provided that the repayment should be at the close of the agricultural

season. That does not mean that the money became due under the personal covenant only after a demand was made by the mortgagee. In my view

money becomes due in this case both for the purpose of redemption u/s 60 and for the suit for sale u/s 67 of the Transfer of Property Act, on the

expiry of the five year period.

Learned Counsel for the appellant finally drew my attention to the Full Bench decision of this Court in Vali Venkataswami Chettiar Vs.

Ramalingam and Others, . The following passage therefrom, I should say, is decisive and clearly against the appellant''s contention before me:

Without hesitation we accept as being correct the decisions of this Court which say that when a mortgage bond provides that the mortgage money

shall be payable on demand it becomes repayable at once and limitation starts from the date of the bond. The question then is whether the position

is altered when the words used are '' when required by you'' or ''whenever demanded''. In our judgment such expressions mean ''on demand''.

They are usually literal translations of words used in bonds written in the vernacular, the vernacular expression being intended to convey the same

meaning as the English expression '' on demand''. We consider that there must be something more in a mortgage deed than this to justify the Court

in holding that the cause of action on the bond only arises when a demand has in fact been made. To construe the words ''when required by you''

as meaning something more than ''on demand'' would in our judgment be putting a forced construction on the words....

Learned Counsel for the appellant referred to the observations in this judgment to the effect that parties to a mortgage deed can agree that the

principal sum shall not become payable until a demand is actually made. The learned Judges immediately observe that this must be clearly

expressed. But here, the tamil expression corresponding to "" when you demand "" are, as observed in The Secretary of State for India in Council

Vs. Pandit Radhika Prasad Bapuli, , at the most mere words carrying no specific import. But in the context that this is a usufructuary mortgage cum

simple mortgage, the expression in fact emphasises the personal covenant, and provides the right to demand the money. Doubts expressed in

certain cases whether the clause in the instruments considered for payment and redemption could at all be read to contain a personal covenant, are

cleared up in the said document recognising the mortgagee''s right to demand the money. It is clear that money becomes due, either from the point

of view of the mortgagor to redeem or from the standpoint of the mortgagee to sue for sale, on the expiry of the five year period. Counsel for the

appellant Sri D. Ramaswami Aiyangar urged that he relied on the very fact that this is a composite mortgage for his contention that the words "" on

demand "" have special significance and the demand, is necessary to make the money due. I am unable to see the special significance sought to be

attributed to these words. In a pure usufructuary mortgage there could be no demand for the mortgage money. Here specifically right to demand

this mortgage money as in a simple mortgage is conferred. Only there should be neither redemption by the mortgagor nor demand for the mortgage

money by the mortgagee for a period of five years. The '' on demand'' in this case clearly means immediately on the expiry of five years.

In the result, it follows that the cause of action for the suit for sale of the mortgaged properties also arose on the expiry of the five year period,

that is in 1932. Clearly, therefore, the suit filed in 1959 is barred by limitation. The Second Appeal fails and is dismissed with costs. No leave.