OFFICIAL LIQUIDATOR Vs. BHARATPUR PRINCESSES TRUST MYSORE

JUDGEMENT

(1.) THE application taken out by the official liquidator, who is in charge of the properties, assets, etc. , of Messrs. Gannon Dunkerely and co. Ltd. , which is in liquidator, relates to a mortgage executed by the company in favour of Messrs. Bharatpur Princesses'Trust, Mysore, the first respondent herein (who may be hereafter referred for the sake of brevity as "mortgages" ). THE company had put up an incomplete construction in premises No. 19, Cathedral Road , Madras. For the purpose of completing the construction, the company, by a resolution dated 4th September, 1961, decided to borrow a sum of Rs. 3, 50, 000 from the mortgagees. Accordingly, a mortgage was executed on 19th April, 1962, stipulating certain terms which will be adverted to in greater detail presently. THE rate of interest stipulated was 8 per cent. THE sum of Rs. 3, 50, 000 was agreed to be paid in instalments. Rs. 75, 000 was agreed to be paid after the execution and registration of the document. THE balance was agreed to be paid in six monthly instalements, each to be made on the production of a certificate of an architect certifying that the works valued at more than 50% had been carried out during the month immediately preceding the date of the certificate. THE principles was agreed to be paid on or before 31st March, 1965, that is, a period of three years was fixed for payment. THE mortgagees were given the right of bring be property to sale out of court under section 69 of the Transfer of property Act. It is not dispute that all the instalements payable under the terms of the agreement were duly paid by the mortgagees.

(2.) THE company committed breach of the stipulation made in the document regarding payment of the principles money. But the company and the mortgagees entered into an agreement, by which the company agreed to pay 9 1/2 % interest per annum form April 1, 1965, and to execute a supplemental mortgage deed duly registered embodying this term. THE mortgagees, for their part, agreed to extend the time for repayment of the loan by another period of three years. Though no such document was executed, interest was paid at the enhanced rate from April 1, 1965. This modification as regards the rate of interest was not filed with the Registrar of Companies. In December, 1969, the advocate for the mortgagees called upon the official liquidator to pay the principle amount the interest. This demand not having been complied with, the mortgagees instructed the auctioneers'the second respondent, to bring the property to sale by virtue of the power given to them under section 69 of the Transfer of property Act. In the notice published by the auctioneers it was described that the property proposed to be sold consisted of land and building including electric and sanitary fitting, fixtures, etc. THEre are wooden partitions in the building. Besides, there are motor-car shed and another hut called Missen hut, the roof of which is galvanised iron sheet put in a arch fashion. THEre are also lights and fans and other fittings. After coming to know about the proposed auction, the official liquidator took out this application praying for the following reliefs : (i) Restraining Messrs. Murray and Co. , the auctioneers, from conducting the public auction proposed to be held on September 27, 1970, of land and building at No. 19, Cathedral Road , Madras -6. (ii) Issuing suitable directions to exclude the assets, viz. , 1. Wooden partitions in the building; 2. motor pumpset together with its accessories; 3. Missen hut; 4. motor-car shed; 5. lights and fans with fitting, other than permanent fittings, from the mortgaged property. (iii) Directing the mortgagees to amend the Tamil Version of the auction notice so as to be in conformity with the schedule of property mentioned in the mortgage deed. (iv) That the mortgagees are not entitled to the enhanced rate of interest of 9 1/2 % from April 1, 1965, as no agreement was property executed and registered both under the Indian Registration Act, 1908, and the companies Act, 1956, for the enhanced rate and directing that the interest at the enhanced rate already paid should be adjusted toward that amount due from the company. THE contention of the official liquidator is that the wooden partitions, Missen hut, motor-car shed, etc. , do not form part of the hypotheca and should, therefore, be excluded. His further contention is that as no agreement regarding the enhanced rate of interest from 8% to 9 1/2 % was executed and registered under the Indian Registration Act and under the companies Act, the mortgagees should be directed to adjust the excess payment of interest towards the amount due under the document calculating interest only at 8%. THE mortgagees oppose this application contending that, under the terms of the mortgage deed, they are entitled to bring to sale the entire building including improvements, accessions and accretions, that what has been paid by way of enhanced interest was in consideration of the mortgagees agreeing to give extension of time for repayment of the mortgage amount, that though the subsequent agreement was not registered, payments made by the company have been duly appropriate in terms of the agreement and that, as such, what had been appropriated is not liable to be reopened. Two questions arise for determination and they are : 1. Are the mortgagees liable to adjust the excess payment of interest at 9 1/2 % per annum towards the mortgage amount by calculating interest at 8 % per annum as stipulated in the mortgage deed " and 2. Whether wooden partitions, motor pump-set, Missen hut, motor-car shed and lights and fans other than permanent fitting are to be excluded from the property to be sold for the realisation of the mortgage amount.