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TMI Blog1995 (11) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... within the jurisdiction of the Debt Recovery Tribunal (herein after referred to as `the Tribunal', for short). The order was made at the stage of preliminary hearing in the suit when the defendants were yet to be noticed. The defendants have now sought for review and recall of the above said order dated 1.5.95 submitting that the order was not warranted inasmuch as the suit was within the jurisdictional competence of the civil court and hence it could not have been transmitted to the Tribunal. (4) On the defendant's application the plaintiff bank has been noticed. (5) The learned counsel for the parties have addressed the court on the question-whether in view of the provisions contained in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Act 51 of 1993) (hereinafter referred to as `the Act', for short), a suit for recovery of mortgage debt is to be tried by civil court or by the Tribunal on and after 24.6.93, the date on which the act has come into force; the Tribunal having been constituted too. (6) Apart from the counsel for the parties Mr Rajiv Mehra Advocate sought leave of the court for intervention at the hearing. He too has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g up of such huge amount of public money in litigation prevents proper utilisation and re-cycling of the funds for the development of the country. (9) The Bill seeks to provide for the establishment of Tribunals and Appellate Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions. Notes on clauses explain in detail the provisions of the Bill. (10) The Preamble to the Act reads that it is an act to provide for the establishment of the Tribunal for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto. I may have a brief resume of the salient features and relevant provisions of the Act in so far as necessary for the purpose of answering the question posed. 10.1 The term debt has been defined in clause (g) of Section 2 of the Act as under : (g) debt means any liability (inclusive of interest) which is alleged as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institutions or the consortium und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. It contemplates a Recovery Officer with power, inter alia, to attach and sell movable or immovable property of the defendant. (11) What is a mortgage ? 11.1 Fisher Lightwoods in their Law of Mortgage (10th Edn) define mortgage as a form of security created by contract, conferring an interest in property defeasible ( i.e. annullable) upon performing the condition of paying a given sum of money, with or without interest, or of performing some other condition. 11.2 The classic definition of mortgage given by Lindley M.R. in Santley vs Wilde (1899) 2 Ch 474 Ca is in the following terms : A mortgage is a conveyance on land or an assignment of chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given. 11.3 The mortgagor's interest under a mortgage consists of two elements- his contractual right to sue for the debt and his proprietary rights in the security. A mortgage debt is usually a speciality debt, and in accordance with the rule as to such debts, it is situate where the mortgage deed happens to be . (Fisher Lightwoods- Law of Mortgage, p.19) 11.4 The mortgagee's remedies for the recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 58(a) of the Transfer of Property Act defines a mortgage as a transfer of an interest in specified immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan and an existing or future debt or performance of an acknowledgement which may give rise to a liability. Clause (b) to (g) of Section 58 proceed to define different kinds of mortgages. 13.1 The characteristic features of mortgages is that right in the property created by the transfer is accessory to the right to recover the debt. The debt subsists in a mortgage, while a transaction by which a debt is extinguished is not a mortgage but a sale ( See-Mulla on the Transfer of Property Act, 7th Ed. p.352) (14) Sterling L.J. has stated the law in Taylor vs London and County Banking Company 1901(2) Ch 231, 254 as under : ALTHOUGH a mortgage debt is a chose in action, yet, where the subject of the security is land, the mortgagee is treated as having `an interest in land' and priorities are governed by the rules applicable to interests in land, and not by the rules which apply to interests in personality . It is stated by Sir William Grant in Jones v. Gibbons (1804)9 Ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors, , mortgage as defined in Section 58 of the Transfer of Property Act itself came up for the consideration of their Lordships. It was a case of usufructuary mortgage. Their Lordships have held : WHEN a mortgage money is paid by the mortgagor to the mortgagee, there does not remain any debt due from the mortgagor to the mortgagee, and therefore, the mortgage can no longer continue after the mortgage money has been paid. The transfer of interest represented by the mortgage was for a certain purpose and that was to secure payment of money advanced by way of loan. A security cannot exist after the loan had been paid up. If any interest in the property continues to vest in the mortgagee subsequent to the payment of the mortgage money to him, it would be an interest different from that of a mortgagee's interest. The mortgage `as a transfer of an interest in immoveable property for the purpose of securing payment of money advanced by way of loan' must come to an end on the payment of the mortgage money. FURTHER,the definition of usufructuary mortgage itself leads to the conclusion that the authority given to the mortgagee to remain in possession of the mortgaged prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a suit for recovery of loan. 15.8 It is, therefore, clear that debt is an essential ingredient of a mortgage. There may be a debt without a mortgage but there can be no mortgage without a debt. Properties are offered as security only for securing recovery of debt. If debt is repaid the mortgage ceases to be a mortgage. Even if the term debt would not have been defined in Act No. 51 of 1993 the mortgage would have been included within the meaning of debt. This is the general law and settled trend of judicial opinion. However, Act 51 of 1993 incorporates the definition of debt in its interpretation clause by way of abundant caution and gives it out a very wide meaning. The quaint essence of the definition is the existence of any liability founded on an allegation as due from any person; the creditor being a bank or a financial institute or a consortium of the two. The liability may be in cash or otherwise. It may be secured or unsecured. A decree or order of any civil court or otherwise may intervene or not; the only rider being that the liability must be legally recoverable. The definition would cover all the cases where the liability is secured by a mortgage, charge, hypothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remedy and suppresses the mischief as the legislature envisioned. ( Carew Co. vs. Uoi The words of a statute, when there is a doubt about their meaning are to be understood in the sense in which they best harmonies with the subject of enactment and the object which the legislature has in view. Their meaning is found not so much in a strictly grammatical or etymological propriety of language, nor even in its popular use, as in the subject or in the occasion on which they are used and the object to be attained. ( Workmen of Dimakuchi Tea Estate vs Management of Dimakuchi Tea Estate, The preamble of a statute like a long title is a part of the Act is an admissible aid to construction. Although not an enacting part, the preamble is expected to express the scope and purpose of the Act more comprehensively than the long tithe. It may recite the ground and cause of making the statute evil sought to be remedied ( The Secretary Regional Transport Authority vs D.P. Sharma, . According to Chief Justice Dyer preamble is a key to open the mind of the makers of the Act and the mischief which they intend to redress ( Stowell vs Lord Zouch (1569) 1 Plowd 353, 369) 17.4 Reference to the Statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act has to be so interpreted as to give the laws its claws . So has to be assigned the term debt its meaning. Having already noticed that most of the loans advanced by the banks are secured by mortgages, the Act would be reduced to a futility if mortgage was to be excluded from the definition of debt. (19) It has been vehemently urged on behalf of the defendant-applicants that the Transfer of Property Act as well as Order 34 Civil Procedure Code confer certain valuable rights on the mortgagors and afford them substantial protection so as to save their property subject to mortgage being liquidated so long as the recovery of debts was possible otherwise. It is submitted that such rights and safeguards would meet with a smiling goodbye before the Tribunal vested with summary jurisdiction. This argument though attractive is devoid of any merit. It is one thing to say that a suit for recovery of a debt based on a mortgage is excluded from the cognizance of the Tribunal; it is another thing to say that if not so excluded what will be the exact procedure to be adopted at the stage of recovery. There is no reason to assume that a Tribunal or the Recovery Officer would not be bound by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount into Court and (ii) if the payment is not so made; but both the directions relate only to the property mortgaged. The plaintiff's right to the other relief is not tried either at the stage or even at the stage of the final decree; so that the final decree under Order 34 Rule 5 Cpc, cannot be said to involve any adjudication as to this part of the suit and much less to have completely disposed of it. After ascertainment of the deficiency arising on the sale of the mortgaged properties, the Court under Order 34 R. 6 takes up this portion of the plaint claim, tries the question whether called a supplemental decree or by any other name, this is the only decree on this part of the claim in the plaint. IT was submitted on the basis of the above ruling that when a relief for personal decree and any other relief such as foreclosure or sale are both available to the mortgagee then the court is competent to grant only the other relief and relief of personal decree cannot be granted in the first instance. So if the plaintiff mortgagee chooses to seek a relief of personal decree then he has to specifically abandon all other reliefs ( which can be granted only by a civi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able or immovable property of the defendant' (b) arrest of the defendant and his detention in prison ; (c) appointing a receiver for the management of the movable or immovable properties of the defendant. Section 28 makes a detailed provision for recovery of money by garnishee orders, as also by distraint and sale or movable property of a defendant in the manner laid down in Third Schedule of the Income Tax Act 1961. 21.2 A perusal of the several provisions contained in Chapter V goes to show the object and intention of the legislature is to secure recovery of money due to the banks and financial institutions without regard to the nature of transaction between the parties. In certain kinds of mortgage such as usufructuary mortgage, remedy of foreclosure is available, still by virtue of the provisions as contained in the Act, the remedy of attachment and sale of movable or immovable property of the defendant, his arrest and detention in prison and appointment of receiver for the management of his properties, garnishee orders etc. are not excluded. All this has been provided with the avowed object of securing recovery of money at the earliest, avoiding cumbersome procedures. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e drawn between a suit seeking a personal decree and a suit based on a mortgage seeking the relief of foreclosure or sale. This contention is also to be rejected for several reasons. 23.1 Order 34 Civil Procedure Code is procedural merely. It does not create or confer any vested right on any party. The parties may contract themselves out of the provisions of Order 34 by means of deed of compromise and pray for a decree being passed at variance with the provisions contained under Order 34 CPC. This is the view taken in Haran Chandas vs Hyderabad State Bank , Bansi Dhar vs Sitala, Air 1944 Oudh 111 and Qazi Ghulam Amir vs Mst Masuda Khatun . If the provisions of Order 34 Civil Procedure Code can be contracted out they can certainly be done away with by force of any legislation to the contrary. No provision of Order 34 Civil Procedure Code can come in the way of debt being recovered in the mode prescribed by the provisions of the Act. Moreover, if there be any conflict between the provisions of the Transfer of Property Act and the Civil Procedure Code on the one hand and provisions of the Act No. 51 of 1993 on the other, then by virtue of Section 34 of the Act the provisions contained ..... X X X X Extracts X X X X X X X X Extracts X X X X
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