GOPALA PILLAI Vs. STATE BANK OF TRAVANCORE

JUDGEMENT

(1.) This appeal arises from a suit for recovery of amounts due under a mortgage evidenced by Ext. P-4 dated 29th November 1954. The appellant who is the 2nd defendant is a transferee from the 1st defendant of item 2 of the plaint schedule under Ext. P-21 dated 18th July 1963.

(2.) The facts may be briefly stated: On deposit of title deeds by the 1st defendant with the plaintiff Bank as evidenced by Ext. P-4 memorandum dated 29th November 1954, the Bank granted in favour of the 1st defendant a loan for a sum of Rs. 5,000. This equitable mortgage was in respect of a property obtained by the 1st defendant and her son under Ext. P-3 partition dated 14th Midhunam 1109 M.E. The property mortgaged is item 1 of the plaint schedule. At the time of Ext. P-3 the 1st defendant had only a minor son aged 2 years. Three more sons were born to her after the partition. At the time of Ext. P-4, save the first son, all the others were minors. O.S. No. 51 of 1963 was instituted by the Bank for the realisation of the amounts due from the 1st defendant under the loan arrangement. Her sons figured in that suit as defendants 2 to 3. They questioned the validity of the equitable mortgage (Ext. P-4) on the ground that the 1st defendant was not the absolute owner of the property and she had no right to alienate the same. The suit was decreed in respect of one-half share. On appeal by defendants 2 to 3 it was held by this Court that the equitable mortgage created by the 1st defendant was not enforceable as the property was jointly held by the 1st defendant and her children. This Court, however, accepted the submission made on behalf of the Bank that the share allotted to the 1st defendant under a subsequent partition was to be treated as substituted security. It was held as follows:

(3.) Both the courts on the basis of the principle in Koru Isaku v. Gottumukkala Seetharamaraju AIR 1948 Mad. 1 (FB) held that the property allotted to the 1st defendant under Ext. P-16 partition dated 24th April 1962 was to be regarded as substituted security against which the Bank was entitled to enforce the mortgage obligation. Both the courts found that the appellant, the 2nd defendant, had notice of the equitable mortgage granted by the 1st defendant prior to Ext. P-16 partition. The courts also found that the subsequent alienation in favour of the 2nd defendant was a sham transaction with a view to creating evidence to defeat the legitimate claims of the Bank. The courts took into account the fact that the 2nd defendant is the father inlaw of the 3rd defendant in O.S. No. 51 of 1963 who is one of the sons of the 1st defendant. The courts held that the 2nd defendant who is a transferee with due notice of the prior transactions could not be heard to contend that the principle of substituted security was of no avail to the plaintiff Bank.