IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA RFA No.48 of 1991 Decided on : January 1, 2009 H.P. Financial Corporation …Appellant Versus Smt. Manmohan Kaur and others …Respondents. Coram The Hon’ble Mr. Justice R.B. Misra, Judge. The Hon’ble Mr. Justice Surjit Singh, Judge. Whether approved for reporting?1 For the Petitioner : Mr. Ajay Sharma. For the Respondents : Per Surit Singh, Judge( Oral ) The present Regular First Appeal is directed against the judgment and decree dated 15.9.1990 of learned Single Judge, whereby a suit filed by appellant-H.P. Financial Corporation against respondents Smt. Manmohan Kaur and others, for recovery of a sum of Rs.2,92,998.60, with interest and costs, has been decreed partly to the extent of Rs.30,150.18, with proportionate costs and simple interest @ 12.5% per annum, and the claim with respect to the remaining amount has been rejected, on the ground that the same is barred by time. 2. Relevant facts may be stated thus. Respondents took a loan of Rs.2,10,000/- from the appellant-Himachal Pradesh Financial Corporation, for purchase of a truck and executed Whether reporters of the local papers may be allowed to see the judgment? …2… various documents, including deed of hypothecation, whereby the truck was hypothecated with the appellant. Hypothecation deed, Ext.P-2, per clause IV(5), provided that in case respondents defaulted in payment of all or any part of the borrowed sum or interest, it shall be lawful for the Corporation to take over possession of the vehicle and after due notice, sell the vehicle for the realization of the debt, without intervention of the Court. Clause V(2) of the deed provided that in case of sale of the vehicle by the Corporation, the sale proceeds will be adjusted towards the loan due to the Corporation and in case of deficiency, the borrower(s) will have to make good the same. 3. Loan taken by the respondents from the appellant was repayable in 18 quarterly instalments of Rs.11,700/- each, with interest. Respondents did not pay even a single instalment. Consequently, notice was issued to the respondents recalling the entire amount of loan, and on their failure to repay the same, possession of the truck was taken on 3rd September, 1984 and it was sold by auction on 17.5.1985, after observing codel formalities, for a sum of Rs.1,20,000/-. After adjustment of the sale proceeds, a sum of Rs.2,92,998.60, including interest upto 30th September, 1986, remained due from the respondents for which a legal notice, Ext.P6, was issued to the respondents, in terms of clause V(2) of the Hypothecation Deed, Ext.P-2. When the respondents did not comply with the demand, suit was filed. 4. Learned Single Judge held that the appellant-plaintiff was entitled to recover the amount of only those quarterly instalments, which became due within three years of the …3… institution of the suit. According to learned Single Judge, those instalments were for the period from November, 1983 to November, 1986. The claim for the rest of the instalments, being beyond the period of limitation, was rejected. Consequently, a decree for a sum of Rs.30150.18, with proportionate costs and interest at the rate of 12 ½ % per annum was passed. 5. Appellant is aggrieved by the judgment and decree of the learned Single Judge, so far as they pertain to the rejection of the claim for the remaining amount, on the ground that the same is barred by limitation. 6. On the last date of hearing, learned counsel for the respondents was present. Today he is not present in the Court. We have heard the learned counsel for the appellant. It has been argued by the learned counsel that according to clause V(2), as referred to hereinabove, respondents had undertaken to indemnify the appellant for the amount remaining deficient, after sale of the hypothecated truck and this indemnity clause became operative only after the truck was sold and sale proceeds thereof were adjusted against the loan and thereafter the deficiency became known. In support of this contention, learned counsel has placed reliance upon a judgment of the Hon’ble Supreme Court in Civil Appeal No. 1971 of 1990, H.P. Financial Corpn. Vs. Smt. Pawna and others, decided on 18.12.2003. That was a case where the borrowers had mortgaged some immovable property. The mortgage deed contained a Clause, i.e. Clause 7, which read as under: …4… “Without prejudice to the above rights and powers conferred on the Corporation by these presents and by Sections 29 and 30 of the State Financial Corporation Act, 1951, and as amended in 1956 and 1972 and the special remedies available to the Corporation under the said Act, it is hereby further agreed and declared that if the partners of the industrial concerned fail to pay the said principal sum with interest and other moneys due from him under these presents, to the Corporation in the manner agreed, the Corporation shall be entitled to realize its dues by sale of the mortgaged properties, the said fixtures and fittings and other assets, and if the sale proceeds thereof are insufficient to satisfy the dues of the Corporation, to recover the balance from the partners of the industrial concern and the other properties owned by them though not included in this security.” (emphasis supplied) 7. Interpreting the emphasized portion of the Clause, the Hon’ble Supreme Court held that this portion was in the nature of a contract of indemnity and it was enforceable only after the deficiency in the amount became known, upon adjustment of the sale proceeds of the mortgaged property. The ratio of the judgment applies to the case in hand on all fours. As already noticed clause V(2) of the Hypothecation Deed, Ext.P2, is in the nature of a contract between the parties that in case the sale proceeds of the truck fell short of the amount due from the respondents, the deficiency shall be made good by the respondents. …5… 8. Hon’ble Supreme Court in the aforesaid case has held that limitation for enforcement of the aforesaid kind of contract, which is in the nature of contract of indemnity, begins to run only after the mortgaged property is sold and the sale proceeds are adjusted against the liability of the loanee, because it is only then that the amount recoverable, under the contract of indemnity, becomes known. 9. In view of the above stated position, appeal is allowed. Judgment and decree of the learned Single Judge are modified and the entire claim of the appellant-plaintiff is decreed, with costs and simple interest @ 12.5% from the date of the filing of the suit to the date of full and final satisfaction of the decree. The appeal stands disposed of. ( R.B. Misra ), J. January 1, 2009 (ss) ( Surjit Singh ), J.