MYLAPORE HINDU PERMANENT FUND, LTD Vs. ANSABAPATHI CHETTI

JUDGEMENT

(1.) This case raises a question of law of some importance. The plaintiff-Fund seeks to enforce an equitable mortgage. The 1 defendant is the father of the 2nd defendant, and they form members of an undivided Hindu family. On the 27 of March, 1920, the defendants executed in favour of the plaintiff-Fund a promissory note for Rs. 9,000 agreeing to repay the sum, on demand, with interest at 7 per cent. per annum. The defendants deposited with the Fund the title-deeds of the house described in the plaint with a view re create an equitable mortgage over the property. On the 7 of December, 1920, they borrowed from the plaintiff a further sum of Rs. 600 and executed another promissory note with terms similar to those contained in the first note. They agreed that the property already mortgaged should be treated as security for this further loan.

(2.) The 1 defendant is a share-holder of the plaintiff-Fund, and the terms on which the Fund can make loans are governed and regulated by its Articles of Association. The plaintiff claims that, although in the notes the interest payable is 7 per cent., it is entitled to charge interest at 12 1/2 per cent. per annum upon the expiry of three years from the dates of the notes. The question to be decided is--and this is the only question raised in the suit--is the plaintiff entitled to this enhanced rate of interest?

(3.) The Articles provide that loans shall be of two kinds, "ordinary" and "special". Loans can be granted only to the share-holders subject to the terms and conditions contained in the Articles of Association (Articles 12 and 13) . It will thus be seen that the Fund can advance loans only to its share-holders, and that the loans can be made only subject to the Articles of Association.