Supreme Court Upholds Mortgagor's Right to Redemption in Mortgage Suit; Extra Interest Under Stay Order Not Part of Preliminary Decree. Order XXXIV Rule 7(1)(c) of Code of Civil Procedure, 1908 Requires Adjudication of Subsequent Costs and Interest Before Being Recoverable Against Mortgagor.

Case Note & Summary

The dispute concerned a suit for redemption of mortgaged property filed by the mortgagor, who is the appellant, against the mortgagee, the respondent. The trial court passed a preliminary decree on February 3, 1954, specifying principal and interest up to a certain date, future interest at three per cent per annum, and directing payment of the amount due on or before July 15, 1954, later extended to August 15, 1954. The decree also provided that if payment was made, a final decree for redemption would be passed in the mortgagor's favour; otherwise, the mortgagee would be entitled to a final decree for foreclosure. Both parties appealed to the High Court. The mortgagor sought stay of the trial court's direction to deposit the decretal amount. The High Court on July 26, 1954 granted stay on the condition that the mortgagor undertake to pay nine per cent per annum interest during the period of stay instead of the three per cent decreed. The mortgagor gave the undertaking, and no deposit was made by August 15, 1954. On October 16, 1958, the High Court dismissed both appeals, confirming the preliminary decree. Importantly, the extra interest arising from the stay undertaking was not included in the preliminary decree. The mortgagor then applied for permission to deposit the amount due under the decree. On March 27, 1959, the trial court permitted the deposit without deciding timeliness. The mortgagor deposited Rs. 42,204/5/- on March 28, 1959. The mortgagee objected that the correct amount was Rs. 46,882/6/6, resulting in a shortfall of over Rs. 4,000 because of the extra interest for the stay period. The mortgagor deposited a further sum of Rs. 4,590 on April 9, 1959, and prayed for a final redemption decree. The trial court, on April 18, 1959, held the deposit was beyond time and directed a final decree for foreclosure. The mortgagor's appeal was initially rejected as insufficiently stamped, but the High Court allowed a revision on July 22, 1961, and remanded the appeal. The Additional District Judge on March 23, 1962 allowed the appeal, holding that under Order XXXIV Rule 8, payment before passing of the final decree was within time, and ordered a final decree for redemption. The mortgagee appealed to the High Court. The High Court agreed that the deposit on April 9, 1959 was within time under Order XXXIV Rule 8, but found a shortfall of Rs. 88/1/- because the entire amount due including extra interest under the stay order had not been deposited. Consequently, it set aside the Additional District Judge's order and restored the trial court's foreclosure decree. The mortgagor then obtained special leave to appeal to the Supreme Court. The core legal issue was whether the extra interest payable under the undertaking given for stay fell within the phrase 'subsequent costs, charges, expenses and interests' in Order XXXIV Rule 7(1)(c)(i) and (ii) of the Code of Civil Procedure, 1908, so as to make the deposit insufficient. The appellant argued that he had deposited the amount due under the preliminary decree plus more, and the only shortage was due to the extra interest arising from an independent stay order, which was not part of the decree and was not adjudicated. The respondent contended that the mortgagor had to deposit the entire amount due, including the extra interest, and the shortfall prevented a final redemption decree. The Supreme Court held that under Order XXXIV Rule 7(1), the mortgagor is required to pay the amount found due under the preliminary decree and any amount adjudged due in respect of subsequent costs, charges, expenses and interests. The extra interest from the stay undertaking was not included in the preliminary decree, was not adjudged, and arose from an independent order of stay; hence it could not be treated as subsequent costs, charges, expenses and interests under the rule. The Court reasoned that such subsequent amounts must be adjudicated before the mortgagor is asked to deposit them, and no adjudication had occurred. The Court also observed that the undertaking to pay extra interest could be enforced separately by the court before the final decree, but its non-inclusion could not defeat the mortgagor's right to a final redemption decree after he complied with the preliminary decree. Accordingly, the Supreme Court allowed the appeal, set aside the High Court's judgment, and held that the appellant was entitled to a final decree for redemption. The Court left open the enforcement of the undertaking separately.

Headnote

Issue of Consideration

Final Decision

Appeal allowed; High Court judgment set aside; appellant entitled to a final decree for redemption; court may enforce undertaking separately.

Law Points