THE HON’BLE SRI JUSTICE B.PRAKASH RAO AND THE HON’BLE SRI JUSTICE G.BHAVANI PRASAD A.S.No.1499 of 1991 JUDGMENT : (PER HON’BLE SRI JUSTICE B.PRAKASH RAO) The appellant is the unsuccessful plaintiff. Aggrieved by the judgment and decree in O.S. No.34 of 1982, dated 15.12.1990 on the file of Principal Subordinate Judge at Vijayawada, Krishna District, dismissing the suit filed by the plaintiff for recovery of money, this appeal is being filed under Section 96 of C.P.C. Heard Sri N.Chandradhar Rao, learned counsel for the appellant and Sri B.V.Subbaiah, Sri V.V.Anil Kumar and Sri Srinivasa Rao learned counsels on behalf of the respondents. In the suit which was filed on 31.12.1981, the claim of the plaintiff was for recovery of Rs.12,78,230-60 Ps being the principal amount, Rs.1,93,705.37 Ps under cash credit hypothecation from the 1st defendant and its partners namely defendants 2 to 4, Rs.52,396.05 Ps. under revolving letter of credit from the 1st defendant and its partners including interest, Rs.4,82,316.53Ps under Cash Credit Hypothecation from the 6th defendant and its partners which includes interest of rs.1,58,247.80 Ps. and also to pass a decree against the suit property in the hands of the 5th defendant and followed by a final decree apart from the future interest and costs. The case of the plaintiff in the plaint is that the plaintiff is the bank having the branch at Guntur. Late Maganti Ramakrishnayya and defendants 2, 3 and 4 are partners in a firm, carrying on business in automobile spare parts Herald Cars etc., at Guntur. The said Ramakrishnayya was died on 17.01.1980. The 5th defendant, his wife is the sole legatee under the will executed by Ramakrishnayya. In another partnership firm i.e., the 6th defendant, late Ramakrishnayya along with defendants 2 and 7 carried on the business at Guntur in tractors and spare parts. In 1968, at the request of the defendants, a cash credit hypothecation limit of Rs.1,00,000/-, Rs.75,000/- by way of cash credit pledge limit and Rs.20,000/- by way of overdraft limit were sanctioned, which is acknowledged through the demand promissory notes executed on 26.12.1968 for the said amounts respectively for hypothecation and cash credit pledge accounts jointly and severally undertaking to pay the amounts with interest as shown therein. They also executed an agreement of hypothecation of stocks, letters of continuing security, letter of pledge, letters of partnership and authority to operate accounts and other security documents. Late Ramakrishnayya also created a mortgage by way of deposit of title deeds namely sale deed dated 14.10.1952 along with allied documents on the properties shown in the schedule as security for repayment. Later in the year 1973 the cash credit hypothecation limit was raised to Rs.1,25,000/-, whereupon the 1st defendant and its partners executed joint and several promissory notes and other documents. The equitable mortgage already created in 1968 was extended to cover the increased limit by affirmation duly made by late Ramakrishnayya. The necessary entries have been made in regard to the equitable mortgage in the security register with the plaintiff. Since the pledge account was later cleared, the 1st defendant and its partners, including late Ramakrishnayya, executed fresh documents of security on 24.03.1974 for the amount of rs.1,25,000/- . Apart from the other incidental documents of continuing security, they also executed agreement of hypothecation of spare parts etc., Similarly in 1974 fresh securities were created by executing joint and several demand promissory note on 24.03.1974 undertaking to pay the amount jointly and severally with interest. A cash credit pledge and overdraft accounts were already cleared, under the cash credit hypothecation account there is an outstanding balance of Rs.1,93,705.37 Ps as on 30.12.1981 with interest. However, later they were further granted a facility by way of revolving letter of credit for an amount of Rs.50,000/- for purchase of spare parts from Simpson and Company Limited, Madras. Later the 6th defendant firm was constituted by late Ramakrishnayya along with defendant Nos.2 and 7 as stated above and admitted Maganti Rukmini, a minor daughter of 2nd defendant, and the accounts being operated by them for which they executed a joint and several undertaking promissory notes apart from the other documents. Once again at the request of the defendants, the cash credit hypothecation was enhanced to Rs.4,00,000/- while the letter of credit limit remained at Rs.3,00,000/- and this was again duly availed by them on execution of necessary documents. All these facilities were availed including that of the 6th defendant. Later at the instance of the 6th defendant and its partners two letters of credit one to an extent of Rs.2,00,000/- on 26.03.1979 and another Rs.3,00,000/- on 17.08.1979 were opened, which were in favour of M/s.Mahindra & Mahindra Limited, Bombay. In terms of the invoices received from M/s.Mahindra & Mahindra Limited, Bombay, the amounts were cleared by the plaintiff. However, no amounts have been paid back by the defendants. In regard to each and separate invoices and the payments made, the plaint narrates the account. In spite of all these, no arrangement has been made for the payment of the amounts due by the defendants in terms of their liabilities. The property, which has been mortgaged is shown in the schedule situated at Vijayawada. Hence, the suit. In the written statement filed by the 3rd defendant, apart from denying the principal allegations contained in the plaint, it was pleaded that late Ramakrishnayya has nothing to do with the 6th defendant firm. Except to the extent of liability by the 1st defendant if it is in time. In the written statement filed by the 4th defendant alleged that he was only a student at the relevant point of time and thereafter, he worked as lecturer on part time and subsequently he became research scholar. Hence, he is nothing to do with the business or the liability. The suit claim is barred and is only made to sign in promissory notes. Hence, it would not bind him nor make him liable. The letter of continuity is a fraud and the plaintiff is put to strict proof of principal allegations. In the written statement filed by the 5th defendant pleaded that the suit is not maintainable for misjoinder of cause of action and the plaintiff is put to strict proof of allegations. The constitution of firm by late RamaKrishnayya is denied. The 5th defendant in his written statement pleaded that the alleged mortgage by deposit of title deeds is not correct. There was no such creation nor deposit of documents and therefore, the plaintiff is put to strict proof. Since there is no valid mortgage, the suit may not maintainable and barred by limitation. He gives very detailed account of amounts and denies about his liability. The 9th defendant while denying his liability, stated that the suit is not maintainable due to non-joinder of M/s.Mahindra & Mahindra Limited and further having regard to the reasons as mentioned therein, his liability does not exist and the plaintiff cannot proceed. The 10th defendant while pleading the denial in regard to the principal allegations from the plaint, in the written statement filed by him, reiterates about the pleas taken by the 9th defendant in his written statement. He stated that interest claims is also excessive and the Court has no jurisdiction in view of the specific clause contained in the consignment notes which specifically stated that the dispute is subject to Hyderabad jurisdiction. Defendant Nos.1, 2, 6 and 8 remained exparte. On these and other pleas raised from both sides in the pleadings, the Court below framed the following issues. i) Whether the suit is barred by time? ii) Whether D.3 is not partner of D.6 firm? iii) Whether the suit is bad for misjoinder of cause of action and paries? iv) Whether D.4 is only a nominal partner without having any responsibility for assets and liabilities in D.1 firm? v) Whether D.4 is not liable for the debt due under revolving credit? vi) Whether the equitable mortgage executed by late Ramakrishnaiah is not binding on D.5? vii) Whether D.5 is not liable for the suit debt? viii) Whether D.7 is not a partner of D.1 and D.8 firms? ix) Whether the transactions after the death of Ramakrishnaiah with the plaintiff are not binding on D.5? x) Whether D.7 is not liable for the debts covered by promotes dt.30.09.1976 and other debts due to the plaintiff? xi) Whether the rate of interest claimed is excessive? xii) Whether this Court has no pecuniary jurisdiction to try the suit? xiii) Whether D.9 is not liable to the entire suit debt? xiv) Whether the alleged mortgage extension letters are genuine one? xv) To what relief? xvi) Whether this Court has no territorial jurisdiction to try the suit? xvii) Whether the mortgage in favour of Plaintiff Bank is legal, valid and binding? xviii) Whether the suit is barred by time? xix) Whether this Court has no jurisdiction in the absence of the mortgage alleged? Later parties went into trial. During the course of enquiry, the plaintiff examined P.Ws 1 to 4 and marked Exs.A.1 to A.66. Whereas the defendants examined D.Ws 1 to 4 and marked Exs.C.1 and C.2 and no other documents are marked. On consideration of the entire evidence and material on record, the Court below dismissed the suit mainly disbelieving the theory of mortgage as set forth by the plaintiff and also held that the Court has no territorial jurisdiction to pass a personal decree against them. Hence, the appeal. After taking into account the detailed submissions made from both sides and we have taken enough pain to take through the entire record. The points which arose for consideration are (1) Whether, on the facts and circumstances of the case, there is any equitable mortgage on 26.12.1968 as stated in the plaint and the same was extended later on the various dates mentioned therein namely on 24.03.1974, 04.12.1974 and 13.09.1976. (2) Whether, on the facts and circumstances of the case, alternatively even whether the mortgage is not proved, a decree can be passed against the defendants by the Court below. Most of the narration as given by the plaintiff, except to the extent of the equitable mortgage, remained undisputed. The plaintiff has come forward with a suit for recovery of the amounts mentioned therein in view of the several facilities availed by late Ramakrishnayya and along with the other partners in both the firms. The 1st defendant is a partnership firm with late Ramakrishnayya, whereas defendant Nos.2, 3 and 4 are its partners. Since the 4th defendant died and later, the legal representatives were brought on record as respondent Nos.11, 12 and 13 during the pendency of this appeal as per the orders in A.S.M.P. No.1777 of 2007. The 5th defendant is the wife of late Ramakrishnayya, who represents his estate. She died and later her legal representatives were brought on record as Defendant Nos.4 and 7. Defendant No.6 is a partnership firm with late Ramakrishnayya and Defendant Nos.2 and 7 and Ms.Rukmini, minor daughter of the 2nd defendant. According to the plaintiff, the 1st defendant availed the loan on 26.12.1968 with a further enhancement on 24.03.1974. The 1st defendant acknowledged the debt on 21.03.1977 and 02.01.1980. The other firm defendant No.6 availed the loan on 04.12.1974, which was further enhanced on 13.09.1976. The 6th defendant acknowledged the debt on 31.08.1979. On behalf of the plaintiff, the accountant was examined as P.W.1, who gives narration of the entire sequel of the transactions and marked documents which takes for whole these transaction between the plaintiff on the one side and defendant Nos.1 and 6 on the other. The Court below by taking into account his evidence held that the defendants are liable for the suit amounts and the plaintiff can also seek a decree against defendant Nos.1 and 6 firms and the other defendants namely defendant Nos.2, 3 and 7. There cannot be any dispute in regard to the liability of the partners both jointly and severally as contemplated under Sections 18 and 25 of the Partnership Act. There is no serious dispute in regard to the factum of being partners in the firm. The entire issue revolves around the factum of the mortgage, whether there is any such transaction by deposit of title deeds. For the loan availed by the 1st defendant on 26.12.1968, the plaintiff marked Ex.A.13, which is memorandum of deposit of title deeds. Whereas the extension of the loan availed by the 1st defendant on 24.03.1974, the memorandum of extension of deposit of title deeds Ex.A.37. In spite of the loan availed by defendant No.6 and for the mortgage memorandum of extension of deposit of title deeds on 04.12.1974 was marked as Ex.A.38. P.W.1 speaks about the Ramakrishnayya depositing the title deeds namely sale deed dated 14.10.1952 relating to the suit schedule property situated at Vijayawada as Ex.A.5. This question has spoken to by him did not attract any serious attack. Admittedly, the documents are with the plaintiff. There is no suggestion in regard to the denial of deposit of title deeds with the plaintiff nor that late Ramakrishnayya did not deposit the documents with the bank with an intent to create mortgage. The entire gamut of attack on behalf of the defendant was mainly that since he was not well and not in a position to move from bed and the document not being executed or signed and muchless there is no registered mortgage. The cross examination also is restricted to these two aspects i.e., non-signing by late Ramakrishnayya and no stamping and unregistered. There is a confusion followed in the Court below in regard to Ex.A.13. In fact Ex.A.13 is a Photostat copy of the security register which was affirmed by late Ramakrishnayya in his presence on 13.09.1976. On behalf of defendants, it was suggested that Ramakrishnayya was paralytic and he did not come to the bank. However, as per the other documents are concerned i.e., Exs.A.14 and A.18 which constitutes the pronote and other hypothecation agreements, it was suggested that he has not executed. Even by reading of the suggestions given to P.W.1, it amply shows that there is clear admission on the part of the defendants about the signatures of late Ramakrishnayya on these documents. Ex.A.37 again also reiterates to the same fact, which only an extension of memorandum of title deeds relating to 6th defendant firm. Once again the suggestion was that he has not signed. Even from the pleadings also, there is no clear and categorical denial on the part of the defendants about the very factum of creation of equitable mortgage by late Ramakrishnayya. In the deposition of D.W.1, the 4th defendant, speaks that late Ramakrishnayya was suffering from paralysis from 1971 and since then he was bed ridden and was not moving out. His mental condition also deteriorated rapidly. Though he pleads ignorance about the will executed by him in his favour, it is quite surprising to note that whether one can execute a document like a will, the plea that he could not have executed other documents as evident as shown, cannot be accepted. Except bald assertion about the deterioration of health and mental condition, there is no proper and clinching evidence to show his complete physical inability or such a condition whether he could not move out to go to the bank and executed a document. All the defendants are concerned with the active reputed business involving substantial finances and are all active. The plea of the defendants that late Ramakrishnayya being not well and denial as to mortgage is only forthcoming in the present proceedings. Nowhere else there is any such reaction or repulsion on the part of the defendants in regard to the mortgage nor of their liability. Both the firms viz., D1 and D6 are defunct, the defendants 3 and 4 have no interest in the mortgaged property. The Court below taking into account the afore said possession in the order of the defendant and the factum that there was no stamp of registration on the mortgage, did not believe the case of the plaintiff in regard to the equitable mortgage. It is now well established that it is only where a document creating a mortgage for security by deposit of title deeds, which has been reduced into writing requires such formalities of stamp and registration, but not otherwise. Several decisions were quoted on this account. Admittedly in this case, there is no such document except the entry with the register with the plaintiff, which is marked as Ex.A.13. The said entry itself is not a document nor reduced into writing. It only records the factum of deposit of title deeds by the deceased. Therefore, the entire premise on which the Court below proceeds as if there is every requirement of execution on stamp with registration etc., is totally on erroneous basis and cannot be accepted. Therefore, from the evidence as stated above and as available on record, several other documents which have been marked on behalf of the plaintiff which remained totally undisputed, un-denied, it amply goes to show that both the firms have availed the facilities and executed the documents. In this connection, late Ramakrishnayya had thus created the equitable mortgage. Therefore, the finding that there was no equitable mortgage is not created, is liable to be set aside. Coming to the other aspect holding that the Court has no jurisdiction, having regard to the fact that we hold that there is an equitable mortgage, it is not necessary. However, the Court below could have approached the problem in a different way to see whether personal decree could have been passed against the defendant as well, if there is a failure on the part of the plaintiff to prove the mortgage. Be that as it may, it is not necessary to go into such question. Therefore, the Court below is totally unsustainable and needs to be varied with. In the circumstances, the judgment and decree dated 15.12.1990 in O.S. No.34 of 1982 passed by the learned Principal Subordinate Judge, Vijayawada is hereby set aside. Accordingly the appeal is allowed and a preliminary decree shall be passed for recovery of Rs.12,78,230.60 Ps. No costs. ________________ B.PRAKASH RAO, J __________________ G.BHAVANI PRASAD,J AUGUST , 2009 KSH