Source: https://www.legalindia.com/judgments/u-m-sivasubramania-pillai-vs-nagappa-pillai-on-14-december-1926
Timestamp: 2019-04-22 08:04:57+00:00

Document:
Posted On December 14, 1926 by &filed under High Court, Madras High Court.
As I have to pay To you in cash the said mortgage amount of Rs. 10,000 (which is) the balance of the sale amount due to you in the matter of the purchase by me of the said properties from you on this date, I shall pay the interest accruing thereon at the rate of one per cent per mensem from this date, on the 12th Chithrai of each year and shall pay the principal amount in cash on the 24th April, 1924 on which the stipulated period of two years expires. Even if there be default on any one of the due dates in respect of the payment of principal or interest, compound interest will be added on the” principal and interest once in 12 months at the rate of Rs. 1-4-0 per cent per mensem from the date of default, irrespective of other due dates and the interest accruing and the principal will, when required by you, be paid (by me) in cash. Till the entire payment of the principal (which is) this mortgage amount and the interest, the undermentioned properties are put to remain as hypotheca.
As there is time for the principal, I shall collect the same afterwards.
4. The plaint prayed for the usual mortgage decree. The defendant was ex parte and when the case came on for trial the plaintiff’s vakil stated that he wanted only a personal decree for the amount and only a personal decree was passed.
5. The defendant raised various pleas in this suit for the recovery of the principal sum, one of them being that the present suit is barred under Order 2, Rule 2, as the whole amount became payable on default of payment of interest at the expiry of the first year and as the plaintiff sued for the recovery of interest alone when the principal also was due. The Subordinate Judge overruled this contention and passed a decree for the amount. Hence this appeal.
6. The only question argued before us is whether the present suit is barred under Order 2, Rule 2 and in order to determine this question we have to see whether on the date of the first suit to recover the interest the principal sum had fallen clue and was capable of being enforced by a suit. I think the terms of the document show clearly that there has to be a demand to enable the mortgagee to claim payment irrespective of the period of two years fixed in the document. The document expressly states that after default and irrespective of the due date the principal sum when required by the mortgagee be paid by the mortgagor in cash. The document winds up by saying that till the entire payment of the principal (which is) this mortgage amount and the interest, the properties described therein will stand as hypotheca. It seems to me that in cases where there is power given to claim the payment due on the mortgage deed and where demand is necessary, the money will not become payable until the demand has been made and the mortgagee has clearly indicated his intention to take advantage of the default and advance the date of payment originally fixed up@n. It is also clear that the default clause being for the benefit of the mortgagee he is not bound to enforce the clause but can waive it. I need only refer to Lachakkammal v. Sokkayya Naick (1918) MWN 586.; Ramadh Bibi Ammal v. Kandasami Pillai (1919) MWN 82.; Sawmy Rao v. Official Assignee of Madras (1925) ILR 48 M 703 : 49 MLJ 474; Badi Bibi Sahibal v. Sami Pillai (1892) ILR 18 M 257; Narna v. Ammani Anima; Kaliappa Nadar v. Sami Aiyar and Velliappa Chettiar v. Venkatasubbarayulu Naidu. In the present case not only is it admitted that no demand was made for the principal sum but it is also clear from the plaint Ex. I that when the suit for interest was filed the mortgagee expressly stated that the principal sum had not then become due, thus showing an unequivocal term that he did not want to enforce the penal clause in the document. Under these circumstances it seems to me to be clear that Order 2, Rule 2 has no application.
7. The appellant’s vakil relied on Muhammad Hafiz v. Muhammad Zakariya (1921) ILR 44 A 121 : 42 MLJ 248 (PC) and Kishen Narain v. Pala Mal (1922) ILR4L32 : 44 MLJ 123. They do not help the appellant as in the view I take of the facts of this case and the terms of the mortgage deed, the principal amount had not become due because there was no demand made for the principal as required by the document. I may point out that in the two cases the first suit was filed after the period within which the debt was payable had expired.
8. It is unnecessary to consider whether the fact that the mortgagee when he claimed interest gave up at the trial his prayer for relief in respect of the mortgage property would convert the suit into one for payment of interest on the personal covenant and would exclude the operation of Order 2, Rule 2.
9. I am of opinion that the Subordinate Judge was right in holding that Order 2, Rule 2 had no application.
10. The appeal fails and is dismissed with costs.
11. I agree. Order 2, Rule 2 of the Civil Procedure Code would only interpose a bar to a suit for the principal due under the mortgage if the cause of action for making that claim had arisen at the time when the respondent filed O.S. No. 495 of 1925 for the interest due for the first year. I do not think that it had so arisen. The mortgage bond provides that upon default in the payment of interest occurring, “the interest accruing and the principal will, when required by you, be paid by me in cash.” I take the words “when required by you” to create an option in favour of the mortgagee to enforce or not to enforce the penal provision so that the cause of action to recover the principal and the enhanced interest within the two years’ period would not arise automatically upon default in payment of interest being made, but only upon intimation to the mortgagor that the option so to recover would be availed of, in other words, upon making a demand. Whether or not in the absence of such a demand the Court was right in giving a decree in O.S. No. 495 for the first year’s interest at the enhanced rate is not now in question, and cannot affect the point under consideration. The fact remains that not only was there no demand for the principal but the respondent showed clearly in his plaint to that earlier suit that it was his intention not to demand it at that time. Unless and until such demand was made, or the two years’ period after which the principal was to fall due had expired, the cause of action to recover it would not arise. The case is thus distinguishable from that dealt with by the Judicial Committee in Muhammad Hafis v. Muhammad Zakariya (1921) ILR 44 A 121 : 42 MLJ 248 (PC) inasmuch as, in the first place, the bond in that case does not appear to have provided for the exercise of an option so that the cause of action to recover the mortgage debt arose upon default and in the second, the period within which the debt was payable had expired. “In either case,” their Lordships observe, “(the mortgagees) could have sued for realisation to provide for the whole amount secured by the deed.” Mortgage bonds construed, to create an option have been acted upon in a number of cases before this Court they are to be found cited in Velliappa Chettiar v. Venkatasubbarayulu Naidu and the principle has been consistently affirmed that, where such an option exists, the cause of action does not arise until, within the term after which payment is to be made, it is exercised?

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