ALLAHABAD BANK LTD Vs. BENARAS BANK LTD

JUDGEMENT

(1.) This appeal arises out of a suit for sale brought by the Benares Bank Limited, Benares, hereinafter referred to as the plaintiff, on the basis of a security bond dated 20 December 1926, executed by Maharaj Kishore Khanna, defendant 3. It appears that a sum of Rs. 1,50,000 was due to the plaintiff from defendant 3 and his nephew, B. Krishna Chandra Khanna, and on 20 December 1926 Krishna Chandra Khanna executed a promissory note with respect to this sum of Eupees 1,50,000 in favour of the plaintiff. By the security bond, defendant 3 stood surety for his nephew Krishna Chandra Khanna and guaranteed payment to the plaintiff of the sum due on the basis of the promissory note. To secure the payment of the amount due to the plaintiff charge was created by defendant 3 on two items of zamindari properties, one situated in the District of Benares and the other in the Province of Bihar and Orissa. These very properties were subject to a prior mortgage in favour of the Allahabad Bank Limited, Calcutta, hereinafter referred to as the defendant Bank. The mortgage in favour of the defendant Bank was created by Maharaj Kishore by deposit of title deeds. It was provided in the security bond in suit that the charge created on the aforesaid properties would be subject to a lien by way of equitable mortgage up to a maximum of Rs. 1,25,000 created by the guarantor in favour of the Allahabad Bank Ltd., Calcutta by a deed of agreement, dated 25 June 1926.

(2.) The plaintiff impleaded a number of defendants in the suit including the defendant Bank. The present appeal is only by the defendant Bank and in this appeal we are concerned only with the pleas raised in defence by that Bank. The plaintiff claimed a decree for sale for a sum of Rs. 1,93,223-10-9 with pendente lite and future interest in accordance with the provisions of Order 34, Rule 4, Civil P.C., with respect to the two properties mentioned above that were detailed in Schedule A of the plaint. The other reliefs prayed for and the other schedules of properties embodied in the plaint are immaterial for the purposes of this appeal. The defendant Bank contested the suit inter alia on the following grounds: The Allahabad Bank contends that the properties mentioned in Schedule A of the plaint are mortgaged to the Allahabad Bank to the extent of Rs. 3,00,000 and that such mortgage is in priority to the rights of all other parties to the suit. Alternatively, the Allahabad Bank contends that all other charges are subject to the mortgage to the Allahabad Bank to the extent of Rs. 1,25,000 together with interest accrued thereupon.

(3.) The contention that the defendant Bank had priority with respect to a sum of Rs. 3,00,000 was not pressed at the trial and we are not concerned with the same in this appeal. The defendant Bank however maintained that it had priority over the plaintiff's claim with respect to a sum of Rs. 1,25,000 together with the interest that had accrued on that amount. The learned Subordinate Judge accepted this contention of the defendant Bank to this extent, that he held that the defendant Bank had priority with respect to a sum o? Rs. 1,25,000 but not with respect to the interest that had accrued on that amount. The defendant Bank has appealed and the only point that has been urged in this appeal is that the defendant Bank was entitled to priority even with respect to the interest on the sum of Rs. 1,25,000. The facts which have a bearing on the decision of the point raised in appeal are undisputed and are as follows : On 20 September 1924, Mr. Khanna, defendant 3, deposited with the defendant Bank title deeds with respect to the two zamindari properties mentioned above and the defendant Bank agreed to advance to defendant 3 a sum of Rs. 1,25,000 on the security of the said properties. This arrangement was oral, but in furtherance of the same defendant 3 executed a promissory note for a sum of Rs. 1,25,000 in favour of the defendant Bank on 26 March 1925. Further, on 27 March 1925, defendant 3 executed a "memorandum of deposit and agreement of mortgage" in favour of the defendant Bank. Reference was made in the last mentioned document to the promissory note just mentioned and to the deposit of the title deeds "as collateral security by way of equitable mortgage," and it was mentioned that that mortgage was to secure not only the repayment of the amount due to the Bank "to the extent of the said limit of Rs. 1,25,000...together with all interest, expenses and charges," but also to secure the repayment of any other amount which may be due from defendant 3 to the defendant Bank "on any other account."