1968 (11) TMI 105 - HC - Indian Laws

Summary

Issues Involved:
1. Creation of Equitable Mortgage
2. Barred by Limitation
3. Liability for Loss and Costs Incurred by the Bank
4. Validity of Auction Sales
5. Alleged Fraud by Defendants
6. Right of the Bank to Enter into Compromise without Defendants' Consent

Issue-wise Detailed Analysis:

1. Creation of Equitable Mortgage:
The court examined whether an equitable mortgage was created on January 14, 1953. The defendants denied the transaction, claiming that the title deeds were taken by the bank's officers under false pretenses. The court, after reviewing oral and documentary evidence, concluded that an equitable mortgage was indeed created by the defendants on January 14, 1953, but only concerning the Banmankhi properties described in lots 1 to 3 of Schedule B of the plaint. Consequently, the preliminary mortgage decree will apply solely to these properties.

2. Barred by Limitation:
The defendants argued that the suit was barred by limitation under Article 57 of the Limitation Act, 1908. However, the court held that if an equitable mortgage was established, the suit would not be barred by limitation. Given the finding that an equitable mortgage was created, the suit was deemed timely.

3. Liability for Loss and Costs Incurred by the Bank:
The court addressed whether the defendants were liable for various losses, including the deficit from the second sale, insurance charges, and costs incurred in Money Suit 75 of 1954. The court concluded that the Bank had acted independently and without consulting the defendants regarding the dispute with R. B. H. M. Jute Mills. The Bank entered into a compromise without the defendants' consent, which was deemed improper. Therefore, the defendants were not liable to reimburse the Bank for these losses, amounting to Rs. 22,273/4/3.

4. Validity of Auction Sales:
The court upheld the validity of the auction sales held on January 21, 1954, and December 21, 1954, rejecting the defendants' claims that the sales were invalid. The sales were deemed binding on the defendants, who had knowledge of both sales.

5. Alleged Fraud by Defendants:
The Bank alleged that the defendants committed fraud by mixing non-jute materials (gudri) in the jute bales. The court found no substantial evidence supporting the fraud claim. The Bank's previous written statement in Money Suit 75 of 1954 contradicted its current allegations, leading the court to reject the fraud claim.

6. Right of the Bank to Enter into Compromise without Defendants' Consent:
The court scrutinized the Bank's right to compromise with R. B. H. M. Jute Mills without consulting the defendants. It was held that after the sale, the Bank acted as an agent for the defendants and should have sought their instructions. The Bank's independent actions, including the compromise, were deemed disadvantageous to the defendants. Consequently, the defendants were entitled to repudiate these actions and were not liable for the resulting losses.

Conclusion:
The appeal was allowed in part. The court modified the judgment and decree of the lower court, granting the plaintiff-respondent a decree for Rs. 43,281.97 instead of Rs. 65,555/3/9. The preliminary mortgage decree will apply only to the Banmankhi properties (lots 1, 2, and 3 of Schedule B), and there will be no mortgage decree for the Rupouli properties (lots 4 and 5). The plaintiff will also receive proportionate costs in the lower court on the revised amount, with no order as to costs in the appeal. Interest pendente lite and future at 6% per annum will apply to the amount of Rs. 43,281.97 from the date of the suit until realization.