IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN FRIDAY, THE 18TH JUNE 2010 / 28TH JYAISTHA 1932 AS.No. 674 of 1997(E) ------------------------------- (OS.NO.123/1996 OF SUB COURT, NEDUMANGAD) .................... PETITIONER/APPELLANT: ------------------------------------- STATE BANK OF TRAVANCORE, A BODY CORPORATE CONSTITUTED AND FUNCTIONING UNDER THE STATE BANK OF INDIA SUBSIDIARIES ACT, HAVING ITS REGISTERED OFFICE AT POOJAPPURA, TRIVANDRUM. BY ADV. SRI.R.S.KALKURA. RESPONDENTS/RESPONDENTS: ----------------------------------------------- 1. K. GOPALAKRISHNAN, S/O. KOCHAPPI, KARINGAYIL COLONY, MARUTHAKUZHI.P.O., KANJOOR VILLAGE, MANJOOR MURI, NEDUMANGAD TALUK. 2. A. PONNAMMA, KARINGAYIL COLONY, MARUTHAKUZHI.P.O., KANJOOR VILLAGE, MANJOOR MURI, NEDUMANGAD TALUK. ADVS. SRI.SIBY MATHEW, SRI.WILSON URMESE, SRI. B. PREMNATH. THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 18/06/2010, ALONG WITH A.S .NO. 51 OF 2001 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: prv. M.N. KRISHNAN, J. = = = = = = = = = = = = = = = A.S. NO. 674 OF 1997 & A.S. NO. 51 OF 2001 = = = = = = = = = = = = = = = Dated this the 18th day of June, 2010. J U D G M E N T A.S. 674/97 is an appeal preferred by the plaintiff, Bank against the judgment and decree passed by the Sub Judge, Nedumangad in O.S.123/96 and the other appeal is filed by the defendants against the very same judgment. The suit is one for realisation of the amount advanced to the first defendant along with the 2nd defendant as guarantor and on non-payment the suit was instituted. The court below found that as far as the first defendant is concerned the suit is barred by limitation and held that there can be a decree against the 2nd defendant by sale of the property equitably mortgaged to the Bank. The plaintiff has come up in appeal regarding A.S. Nos. 674/97 & 51 OF 2001 -2- the disallowance of a decree against D1 and personal decree against D2 whereas the defendants have come up in appeal contending that when the principal debtor's liability stands discharged no action can be taken against the guarantor or surety and further there is absolute bar of limitation. 2. The Bank, advanced a sum of Rs.27,000/- to the first defendant for the purchase of an auto rickshaw and his mother, the 2nd defendant stood as guarantor and created an equitable mortgage in favour of the Bank. The transaction was in September, 1989 and the Bank had instituted the suit for personal decree as far as the sale of the properties mortgaged. It is very clear from the plaint that the plaintiffs have sought for a decree by sale of the A.S. Nos. 674/97 & 51 OF 2001 -3- properties hypothecated as well as by sale of the immovable property mortgaged. When such is the prayer the Court considers and when it finds that the transaction is proved, it passes a personal decree as well a decree by sale of the properties involved in the case. 3. Now the learned counsel for the appellant very strongly contends before me that the suit is not for the recovery of the amount due under a mortgage but it is an amount which is sought for by recovery of the advancement of loan. So according to him being a simple money transaction and that being an agreement between the parties the plaintiff will not get 12 years time u/s 62 of the Indian Limitation Act to file a suit. In support of the same the learned counsel had relied upon the decision of the A.S. Nos. 674/97 & 51 OF 2001 -4- Calcutta High Court reported in Pradeep Chand Lall v. Grindlays Bank Lt.d (AIR 1987 Calcutta 157). It was a case where the Bank moved a suit for realisation of the money due on a over draft account. The over draft was secured by promissory note executed by principal debtor and guarantee agreements executed by guarantors. There was also equitable mortgage of principal debtors property created. It has to be stated that it was a suit filed on the basis of an over draft account. Learned judges held that to attract the provisions of S.68 of the Transfer of property Act it is necessary that there should be a suit for recovery of the mortgage money. 4. I may straight away refer to Article 62 of the Indian Limitation Act. Article 62 of the A.S. Nos. 674/97 & 51 OF 2001 -5- Act makes it very clear, to enforce payment of money secured by a mortgage or otherwise charged upon immovable property, the period prescribed is 12 years, when the money secured by the mortgage becomes due. So when money is secured by virtue of a mortgage created whether as a principal liability or collateral security being a transaction which involves mortgage of the property I am of the view that Article 62 of the Limitation Act would straight away apply to such transactions and 12 years time can be availed of by the plaintiff from the date when the money sued for becomes due. 5. Now a reading of the plaint also would reveal that the suit is also filed on the basis of an equitable mortgage. It is averred in paragraph 5 of the plaint that as the collateral A.S. Nos. 674/97 & 51 OF 2001 -6- security the 2nd defendant had created an equitable mortgage and the cause of action portion also would very clearly reveal that the transaction takes place at Karipur village where B schedule property was also situated which are within the jurisdiction of the Court. Prayer B to the plaint also makes it very clear that a relief is sought against the property. Prayer C makes it further clear that the decreed amount to be realised by sale of the plaint schedule property through Court. So this is a case where there is a composite prayer for personal relief as well as relief by sale of the property which is created as an equitable mortgage. So when the averments in the plaint makes it crystal clear that the party wants to enforce the mortgage created for the purpose of the loan it A.S. Nos. 674/97 & 51 OF 2001 -7- is certain that Article 62 would help the plaintiff to get over the period of limitation and the decision cited by the learned counsel for the appellant may not come to his rescue. 6. The learned counsel then very strongly contends that here is a case where the principal debtor has been discharged as the claim against him is barred by limitation. Since there is an appeal filed by the Bank challenging the same I will answer it first before considering the impact of the same. It has to be stated that it is a very sad state of affairs that acknowledgments are obtained by the Bank authorities without following the moral or legal principles in the banking system. Explicitly on the basis of the records it can be seen that acknowledgment is obtained on 18.8.92 in a stamp A.S. Nos. 674/97 & 51 OF 2001 -8- paper which was purchased in the year 1993. There cannot be a worst case than this to hold that the revival letters are totally vitiated and cannot be taken into consideration. Therefore the contention of the learned counsel for the Bank for reconsideration of the same does not loom large at all. 7. Then the learned counsel for the Bank would contend that the amount is to be paid in 52 instalments and the last instalment is due only on 8.10.93 and since the suit is instituted within a period of three years from the last due instalment the claim is not barred by limitation. But unfortunately I do not find any plea in the plaint regarding the same. The cause of action is on the original agreement dated 6.9.89 and therefore at this length of A.S. Nos. 674/97 & 51 OF 2001 -9- time the present argument raised in the memorandum of appeal cannot be looked into. Therefore I find that the claim against D1 found as barred by limitation does not call for any interference. 8. Now I will consider the other point. U/s 128 of the Indian Contract Act liability of a surety is coextensive with that of the principal debtor unless it is otherwise provided by the contract. So unless there is a contract to the contrary exonerating the surety as well, the liability of the surety runs parallel with that of the principal debtor or it becomes an individual cause of action against the surety as well. 9. In Radha Thiagarajan v. South Indian Bank Ltd. (1985 KLT S.N. 43 page 29) the A.S. Nos. 674/97 & 51 OF 2001 -10- Division Bench of this Court considered the question whether discharge of principal debtor will discharge the surety. The Division Bench held that the discharge of the principal debtor will not discharge the surety where it is not brought about by the voluntary act of the creditor, but by the operation of law. So if by operation of law there is a discharge against the principal debtor then it will not affect the surety's liability. 10. Learned counsel for the appellant had brought to my notice a decision of the Division Bench of this Court reported in Francis v. Central Bank of India (1990 (2) KLT 983). The Division Bench in paragraph 22 had considered the question regarding the performance to be done by the surety. A.S. Nos. 674/97 & 51 OF 2001 -11- 11. Learned counsel had referred to the decision of the Division Bench of this Court reported in Union Bank of India v. Stephen (1989 (1) KLT 627) and referred to paragraph 19 of the judgment therein. There the honourable judges has referred a decision reported in 1979 KLT 566 where the learned Judge found that the principal debtor is not liable to pay the amount because under the statute, the debt stood discharged. In a case where the debt stands discharged, we feel that the question is different from that of a case where the debt is barred by limitation. So virtually the dictum laid down really lays down the same principle embodied in 1985 KLT S.N. 43 page 29) where the Court held that when the liability stands discharged then there is nothing to be charged and so you cannot proceed A.S. Nos. 674/97 & 51 OF 2001 -12- against the surety. The Division Bench in the decision reported in Union Bank of India v. Stephen 1989 (1) KLT 627 had carved out the plea on barred by limitation. Further now when the debt gets barred only the remedy is lost and the right is not extinguished. So when the right is not extinguished one cannot say that when it is otherwise enforceable and it cannot be enforced. So I find that the liability survives against the surety for the reason that the suit has been brought within the permissible time of 12 years under Article 62 of the Limitation Act and that the liability of the surety being coextensive with that of the principal debtor, will survive. That is why in very many decisions it has been held that when the liability is there and it has not got discharged, the party can proceed A.S. Nos. 674/97 & 51 OF 2001 -13- against the surety even without the junction of the principal debtor. So from these discussions I hold that, (1) Article 62 of the Indian Limitation act squarely applies and if there is a mortgage it will certainly save the period of limitation and one will get 12 years. (2) Since the liability of the surety is coextensive with that of the principal debtor unless the liability of the principal debtor gets discharged the liability of the surety will continue and action will lie. 12. Now the learned counsel for the appellant, i.e. for the defendant would submit before me that Ext.A5 confirmation letter is not proper and when one has attempted to express creation of an equitable mortgage in writing A.S. Nos. 674/97 & 51 OF 2001 -14- unless and until it is registered it is barred on the principles of law. It is a settled principle of law that equitable mortgage need not be registered. Secondly it is equally settled that if the equitable mortgage is reduced into writing it has to be registered. But here Ext.A5 convincingly show that an equitable mortgage has been created earlier and it is only in mortgaging the same a confirmation letter is sent. It indicates that the equitable mortgage is not created by writing and therefore it does not require any registration. 13. From these discussions I feel that some modification regarding interest is to be given. So the decree of the lower Court is modified and the rate of interest shall be at 12% per annum on the sum of Rs.52,800/- with quarterly rests A.S. Nos. 674/97 & 51 OF 2001 -15- from the date of suit till realisation. All other findings of the Court below is sustained. Therefore, with the above modification of interest, both the appeals are dismissed. M.N. KRISHNAN, JUDGE. ul/- A.S. Nos. 674/97 & 51 OF 2001 -16- M.N. KRISHNAN, J. = = = = = = = = = = A.S. Nos. 674/97 & 51 OF 2001 = = = = = = = = = = = J U D G M E N T 18th June, 2010.