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CASE NO.: Appeal (civil)  175 of 2007

PETITIONER: S. NAZEER AHMED

RESPONDENT: STATE BANK OF MYSORE AND ORS

DATE OF JUDGMENT: 12/01/2007

BENCH: H.K. SEMA & P.K. BALASUBRAMANYAN

JUDGMENT: J U D G M E N T  (Arising out of SLP(C) No.20624 of 2004)

P.K. BALASUBRAMANYAN, J.

                1.              Leave granted. 2.              Defendant No. 1, the appellant, borrowed a sum  of Rs.1,10,000/- from the plaintiff Bank for the purchase  of a bus.  He secured repayment of that loan by  hypothecating the bus and further by equitably  mortgaging two items of immovable properties.  The Bank  first filed O.S. No. 131 of 1984 for recovery of the money  due.  The said suit was decreed.  The Bank, in execution,  sought to proceed against the hypothecated bus.   The bus  could not be traced and the money could not be recovered.   The Bank tried to proceed against the mortgaged  properties in execution.  The appellant resisted by  pointing out that there was no decree on the mortgage and  the bank could, if at all, only attach the properties and  could not sell it straightaway.  That objection was upheld.   The Bank thereupon instituted the present suit, O.S. No.  35 of 1993, for enforcement of the equitable mortgage.   The appellant resisted the suit by pleading that the suit  was barred by Order II Rule 2 of the Code of Civil  Procedure, that the transaction of loan stood satisfied by a  tripartite arrangement and transfer of the vehicle to one  Fernandes, that there was no valid equitable mortgage  created and no amount could be recovered from him  based on it and that the suit was barred by limitation.  

3.              The trial court held that the suit was not hit by  Order II Rule 2 of the Code.  It also held that the appellant  has not proved that the loan transaction has come to an  end by the claim being satisfied.  But, it dismissed the suit  holding that the suit was barred by limitation.  It also held  that there was no creation of a valid equitable mortgage  since the memorandum in that behalf was not registered.   The Bank filed an appeal in the High Court.  The High  Court held that the memorandum did not require  registration and that a valid and enforceable equitable  mortgage was created.  The suit was held to be in time.  It  held that the suit was hit by Order II Rule 2 of the Code.    But, since the appellant had not challenged the finding of  the trial court that the suit was not hit by Order II Rule 2  of the Code by filing a memorandum of cross objections,  the plea in that behalf could not be and need not be

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upheld.  It purported to invoke Order XLI Rule 33 of the  Code to grant the Bank a decree against the appellant  though it refused a decree to the Bank against the  guarantor.  It did not disturb the finding of the trial court  on the tripartite arrangement set up by the appellant  based on the alleged transfer of the vehicle.   

4.              Being aggrieved by the decree, the appellant  approached this Court with the Petition for Special Leave  to Appeal.  This Court while issuing notice, confined the  appeal to two questions.  They were: 1)      Why the second suit would not be hit by  Order 2 Rule 2, C.P.C.?; and  

2)      In view of the finding arrived at vide para 19  of the judgment (Annexure P-2), why  defendant No.1 should not have been held to  have been discharged from the liability?

5.              We do not think it necessary to broaden the  scope of challenge in this appeal in the light of the  findings entered and in the circumstances of the case.  We  are therefore inclined only to examine the two questions  posed by this Court at the stage of issuing notice in the  Petition for Special Leave to Appeal.  

6.              We will first consider whether the suit is barred  by Order II Rule 2 of the Code.  Whereas the trial court  held that the suit on the equitable mortgage filed by the  Bank was not barred by Order II Rule 2 of the Code  especially in the context of Order XXXIV Rules 14 and 15  of the Code, the High Court was inclined to the view that  the suit was barred, though it did not accede to the prayer  of the appellant to dismiss the suit as being hit by Order II  Rule 2 of the Code.  The High Court seems to have been of  the view that since the Bank in the prior suit omitted to  sue on the equitable mortgage without the leave of the  court, the present suit was barred.  But it proceeded to  rely on Order XLI Rule 33 of the Code and ended up by  granting the Bank a decree against the appellant.  It is not  very clear to us why Order XLI Rule 33 of the Code or the  principle embodied therein has to be invoked in the case,  since the plaintiff Bank had filed an appeal against the  decree dismissing its suit and was claiming the relief  claimed in the suit..

7.              The High Court, in our view, was clearly in error  in holding that the appellant not having filed a  memorandum of cross-objections in terms of Order XLI  Rule 22 of the Code, could not challenge the finding of the  trial court that the suit was not barred by Order II Rule 2  of the Code.  The respondent in an appeal is entitled to  support the decree of the trial court even by challenging  any of the findings that might have been rendered by the  trial court against himself.  For supporting the decree  passed by the trial court, it is not necessary for a  respondent in the appeal, to file a memorandum of cross- objections challenging a particular finding that is rendered  by the trial court against him when the ultimate decree  itself is in his favour.  A memorandum of cross-objections  is needed only if the respondent claims any relief which  had been negatived to him by the trial court and in

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addition to what he has already been given by the decree  under challenge.  We have therefore no hesitation in  accepting the submission of the learned counsel for the  appellant that the High Court was in error in proceeding  on the basis that the appellant not having filed a  memorandum of cross-objections, was not entitled to  canvass the correctness of the finding on the bar of Order  II Rule 2 rendered by the trial court.   

8.              We also see considerable force in the submission  of learned counsel for the appellants that the High Court  has misconceived the object of Order XLI Rule 33 of the  Code and has erred in invoking it for the purpose of  granting the plaintiff Bank a decree.  This is a case where  the suit filed by the plaintiff Bank had been dismissed by  the trial court.  The plaintiff Bank had come up in appeal.   It was entitled to challenge all the findings rendered  against it by the trial court and seek a decree as prayed  for in the plaint, from the appellate court.  Once it is  found entitled to a decree on the basis of the reasoning of  the appellate court, the suit could be decreed by reversing  the appropriate findings of the trial court on which the  dismissal of the suit was based.  For this, no recourse to  Order XLI Rule 33 is necessary.  Order XLI Rule 33  enables the appellate court to pass any decree that ought  to have been passed by the trial court or grant any further  decree as the case may require and the power could be  exercised notwithstanding that the appeal was only  against a part of the decree and could even be exercised in  favour of the respondents, though the respondents might  not have filed any appeal or objection against what has  been decreed.  There is no need to have recourse to Order  XLI Rule 33 of the Code, in a case where the suit of the  plaintiff has been dismissed and the plaintiff has come up  in appeal claiming a decree as prayed for by him in the  suit.  Then, it will be a question of entertaining the appeal  considering the relevant questions and granting the  plaintiff the relief he had sought for if he is found entitled  to it.  In the case on hand therefore there was no occasion  for applying Order XLI Rule 33 of the Code.  If the view of  the High Court was that the suit was barred by Order II  Rule 2 of the Code, it is difficult to see how it could have  resorted to Order XLI Rule 33 of the Code to grant a  decree to the plaintiff in such a suit.  In that case, a  decree has to be declined.  That part of the reasoning of  the High Court is therefore unsustainable.   

9.              Now, we come to the merit of the contention of  the appellant that the present suit is hit by Order II Rule 2  of the Code in view of the fact that the plaintiff omitted to  claim relief based on the mortgage, in the earlier suit O.S.  No. 131 of 1984.  Obviously, the burden to establish this  plea was on the appellant.  The appellant has not even  cared to produce the plaint in the earlier suit to show  what exactly was the cause of action put in suit by the  Bank in that suit.  That the production of pleadings is a  must is clear from the decisions of this Court in Gurbux  Singh Vs. Bhooralal [(1964) 7 S.C.R. 831] and M/s  Bengal Waterproof Limited Vs. M/s Bombay  Waterproof Manufacturing Co. & Anr. [(1996) Supp. 8  S.C.R. 695].  From the present plaint, especially  paragraphs 10 to 12 thereof, it is seen that the Bank had  earlier sued for recovery of the loan with interest thereon  as a money suit.  No relief was claimed for recovery of the

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money on the foot of the equitable mortgage.  In that suit,  the Bank appears to have attempted in execution, to bring  the mortgaged properties to sale.  The appellant had  objected that the suit not being on the mortgage, the  mortgaged properties could not be sold in execution  without an attachment.  That objection was upheld.  The  Bank was therefore suing in enforcement of the mortgage  by deposit of title deeds by the appellant.   

10.             From this, it is not possible to say that the  present claim of the plaintiff Bank has arisen out of the  same cause of action that was put forward in O.S. No. 131  of 1984.   What Order II Rule 2 insists upon is the  inclusion of the whole of the claim which the plaintiff is  entitled to make in respect of the cause of action put in  suit.  We must notice at this stage that in respect of a suit  in enforcement of a mortgage, the bar under Order II Rule  2 has been kept out by Order XXXIV Rule 14 of the Code.   Rule 15 of Order XXXIV makes the rules of Order XXXIV  applicable to a mortgage by deposit of title deeds.  We may  quote Order XXXIV Rule 14 hereunder: "Suit for sale necessary for bringing  mortgaged property to sale \026 (1)  Where a  mortgage has obtained a decree for the  payment of money in satisfaction of a claim  arising under the mortgage, he shall not be  entitled to bring the mortgaged property to  sale otherwise than by instituting a suit for  sale in enforcement of the mortgage, and he  may institute such suit notwithstanding  anything contained in Order II Rule 2.

2)      Nothing in sub-rule (1) shall apply  to any territories to which the Transfer of  Property Act, 1882 (4 of 1882), has not  been extended."

11.             It is clear from sub-rule (1) of Rule 14 of Order  XXXIV of the Code that notwithstanding anything  contained in Order II Rule 2 of the Code, a suit for sale in  enforcement of the mortgage can be filed by the plaintiff  Bank and in fact that is the only remedy available to the  Bank to enforce the mortgage since it would not be  entitled to bring the mortgaged property to sale without  instituting such a suit.  Be it noted, that Rule 14 has been  enacted for the protection of the mortgagor.  In the context  of Rule 14 of Order 34 of the Code, it is difficult to uphold  a plea based on Order II Rule 2.  If the appellant wanted to  show that the causes of action were identical in the two  suits, it was necessary for the appellant to have marked in  evidence the earlier plaint and make out that there was a  relinquishment of a relief by the plaintiff, without the leave  of the court.  Even then, the effect of Rule 14 will remain  to be considered.  

12.             That apart, the cause of action for recovery of  money based on a medium term loan transaction  simpliciter or in enforcement of the hypothecation of the  bus available in the present case, is a cause of action  different from the cause of action arising out of an  equitable mortgage, though the ultimate relief that the  plaintiff Bank is entitled to is the recovery of the term loan  that was granted to the appellant.  On the scope of Order

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II Rule 2, the Privy Council in Payana Reena Saminatha  & Anr. Vs. Pana Lana Palaniappa [XLI Indian Appeals  142] has held that Order II Rule 2 is directed to securing  an exhaustion of the relief in respect of a cause of action  and not to the inclusion in one and the same action of  different causes of action, even though they may arise  from the same transactions.  In Mohammad Khalil Khan  & Ors. Vs. Mahbub Ali Mian & ors. [A.I.R. 1949 Privy  Council 78 (75 Indian Appeals 121)], the Privy Council has  summarised the principle thus:  "The principles laid down in the cases thus  far discussed may be thus summarised:

(1)     The correct test in cases falling under  O.2, R.2, is "whether the claim in the new  suit is in fact founded upon a cause of  action distinct from that which was the  foundation for the former suit."  Moonshee  Buzloor Ruheem V. Shumsunnissa Begum,  (1867-11 M.I.A. 551 : 2 Sar. 259 P.C.)  (supra)

(2)     The cause of action means every fact  which will be necessary for the plaintiff to  prove if traversed in order to support his  right to the judgment.  Read V. Brown,  (1889-22 Q.B.D. 128 : 58 L.J.Q.B. 120)  (supra)

(3)     If the evidence to support the two  claims is different, then the causes of  action are also different.  Brundsden v.  Humphrey, (1884-14 Q.B.D. 141 : 53  L.J.Q.B. 476) (supra)

(4)     The causes of action in the two suits  may be considered to be the same if in  substance they are identical.  Brundsden v.  Humphrey, (1884-14 Q.B.D. 141 : 53  L.J.Q.B. 476) (supra)

(5)     The causes of action has no relation  whatever to the defence that may be set up  by the defendant nor does it depend upon  the character of the relief prayed for by the  plaintiff.  It refers \005. to the media upon  which the plaintiff asks the Court to arrive  at a conclusion in his favour.  Muss.  Chandkour v. Partab Singh, (15 I.A. 156 :  16 Cal. 98 P.C.) (supra).  This observation  was made by Lord Watson in a case under  S. 43 of the Act of 1882 (corresponding to  O.2 R.2), where plaintiff made various  claims in the same suit."

13.             A Constitution Bench of this Court has  explained the scope of the plea based on Order II Rule 2 of  the Code in Gurbux Singh Vs. Bhooralal (supra).  It will  be useful to quote from the Head note of that decision: "Held: (i)  A plea under Order 2 rule 2 of the  Code based on the existence of a former  pleading cannot be entertained when the  pleading on which it rests has not been  produced.  It is for this reason that a plea of  a bar under O.2 r.2 of the Code can be

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established only if the defendant files in  evidence the pleadings in the previous suit  and thereby proves to the court the identity  of the cause of action in the two suits.  In  other words a plea under O.2 r.2 of the  Code cannot be made out except on proof of  the plaint in the previous suit the filing of  which is said to create the bar.  Without  placing before the court the plaint in which  those facts were alleged, the defendant  cannot invite the court to speculate or infer  by a process of deduction what those facts  might be with reference to the reliefs which  were then claimed.  On the facts of this  case it has to be held that the plea of a bar  under O.2 r.2 of the Code should not have  been entertained at all by the trial court  because the pleadings in civil suit No. 28 of  1950 were not filed by the appellant in  support of this plea.

(ii) In order that a plea of a bar under O. 2.  r. 2(3) of the Code should succeed the  defendant who raises the plea must make  out (i) that the second suit was in respect of  the same cause of action as that on which  the previous suit was based; (ii) that in  respect of that cause of action the plaintiff  was entitled to more than one relief (iii) that  being thus entitled to more than one relief  the plaintiff, without leave obtained from  the Court omitted to sue for the relief for  which the second suit had been filed.

It is not necessary to multiply authorities except to notice  that the decisions in Sidramappa Vs. Rajashetty & Ors.  [(1970) 3 S.C.R. 319], Deva Ram & Anr. Vs. Ishwar  Chand & Anr. [(1995) Supp. 4 S.C.R. 369] and State of  Maharashtra & Anr. Vs. M/s National Construction  Company, Bombay and Anr. [(1996) 1 S.C.R. 293] have  reiterated and re-emphasized this principle.   

14.             Applying the test so laid down, it is not possible  to come to the conclusion that the suit to enforce the  equitable mortgage is hit by Order II Rule 2 of the Code in  view of the earlier suit for recovery of the mid term loan,  especially in the context of Order XXXIV Rule 14 of the  Code.  The two causes of action are different, though they  might have been parts of the same transaction.  Even  otherwise, Order XXXIV rule 14 read with rule 15 removes  the bar if any that may be attracted by virtue of Order II  Rule 2 of the Code.  The decision of the Rangoon High  Court in Pyu Municipality Vs. U. Tun Nyein (AIR 1933  Rangoon 158) relied on by learned counsel for the  appellant does not enable him to successfully canvass for  the position that the present suit was barred by Order II  Rule 2 of the Code, as the said decision itself has pointed  out the effect of Order XXXIV Rule 14 and in the light of  what we have stated above.

15.             Then the question is whether the appellant has  established that there was a tripartite arrangement come

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to, by which the bus was made over by him to one  Fernandes and Fernandes undertook to the Bank to  discharge the liability under the mid term loan.  In  support of his case, the appellant had only produced  Exhibits D1 to D4 which only indicate an attempt to bring  about an arrangement of that nature.  But they do not  show that there was any such concluded arrangement and  there was a taking over of the liability by Fernandes as  agreed to by the Bank.  The fact that the Bank has paid  the insurance premium for the bus in question, would not  advance the case of the appellant since the Bank, as the  hypothecatee of the bus was entitled to and in fact, as a  prudent mortgagee, was bound to, protect the security  and the insurance of the vehicle effected in that behalf  cannot be taken as a circumstance in support of the plea  put forward by the appellant.  The trial court, after  considering the evidence, rightly noticed that the burden  was on the appellant to show that he had handed over the  possession of the vehicle to one Fernandes on the  intervention of the Bank and on the basis of a tripartite  arrangement or taking over of liability by Fernandes and  that the liability of the appellant had come to an end  thereby.  Learned counsel for the Bank rightly submitted  that no novation was proved so as to enable the appellant  to riggle out of the liability under the loan transaction.    The High Court has not interfered with the reasoning and  conclusion of the trial court on this aspect and has in fact  proceeded to grant the plaintiff Bank a decree for the suit  amount based on the equitable mortgage.  We were taken  through Exhibits D1 to D4 and even a fresh document  attempted to be marked in this Court along with its  counter affidavit by the Bank.  On going through the said  documents, the other evidence and the reasoning adopted  by the trial court, we are satisfied that there is no evidence  to show that there was a tripartite agreement on the basis  of which the appellant could disclaim liability based on it.   It is seen that the appellant has not even examined  Fernandes in support of the plea of the tripartite  arrangement and the taking over of the liability of the  appellant, by him.  In this situation, we see no reason to  uphold the plea of the appellant that the liability has been  transferred to Fernandes at the instance of the Bank and  that the appellant was no more liable for the plaint  amount.  

16.             Thus, on a consideration of all the relevant  aspects, we are satisfied that the High Court was correct  in granting the Bank a decree in the suit.  There is  therefore no reason to interfere with that decree.  We  therefore confirm the judgment and decree of the High  Court and dismiss this appeal with costs.