1. This special second appeal raises a very short but a very interesting point of law. On 19-5-1923, one Mangore mortgaged the property in suit to defendant 1 for Rs. 5000, It was a possessory mortgage and a rent note was executed by Mangore agreeing to pay rent to defendant 1, and under that rent-note Mangore continued to remain in possession of the property, On 31-12-1930, Mangore executed a second mortgage in favour of the plaintiff.
The plaintiff then filed a suit to enforce his mortgage. He obtained a decree and in execution of the decree the plaintiff purchased the mortgaged property on 25-10-1937. The mortgagor continued to be in possession of the property from 1923 to 1930 and he did not pay any rent to defendant 1. Therefore in 1928 defendant l filed a suit to recover possession of the property and also arrears of rent A decree was passed in his favour in 1930 under which he obtained possession, but he did not execute the decree for rent. The plaintiff then filed the present suit from which this appeal arises for redemption of defendant 1's mortgage.
2. The contesting defendant is defendant 2 to whom the mortgage was assigned by defendant 1, and the question which we have to consider is whether defendant 2 is entitled to claim from the plaintiff, as part of the mortgage debt which remains payable, the rent for the period 1923 to 1930 during which the mortgagor was in possession of the property. Defendant l being the mortgagee in possession is liable to account and he has to account for all rent recovered by him while he was in possession. The stipulation in the mortgage with regard to payment of interest is that the mortgagor was bound to pay interest at 10 per cent. The mortgage deed further goes on to stipulate that the mortgaged property has been given in possession of the mortgagee for five years for the satisfaction of interest. Then liberty is given to the mortgagee to let out the property to any person and the mortgagee is to recover his interest out of the rent which the property would realise. If the rent received falls short of the amount of interest, then the mortgagor is to make good the deficit. Mr. Kotwal's contention is that a mortgagee in possession is only bound to account for rents actually received. He is also bound to account on the footing of wilful default if owing to his negligence he fails to recover rents which he could have recovered. But according to Mr. Kotwal when the mortgagor himself is the tenant and the mortgagor fails to pay rent to the mortgagee, it could never be said that the mortgagee was in default in not recovering the rent from the mortgagor. The mortgagor cannot make use of his own default to charge the mortgagee with wilful default. That is a perfectly sound proposition of law and in support of that proposition authorities were cited at the bar which, in our opinion, it is unnecessary to consider, because the position is well established both in our country and in England. It has even been said that a mortgagee cannot be deemed to be in possession and liable to account as a mortgagee in possession if themortgagor continues to be the tenant or if the mortgagor is in control in any sense of the term of the mortgaged property. Therefore, we accept Mr. Kotwal's proposition that in this particular case it cannot be said that the mortgagee is liable to account for rents from 1923 to 1930 because the property was in possession of the mortgagor and in fact no rents was paid by the mortgagor to the mortgagee. The mortgagee would only be liable to account. if in fact he had received rent from the mortgagor.
3. But, in our opinion, that is not the true or the correct approach to this case. If no rent had been received and nothing more had been done by the mortgagee, then in the redemption suit the mortgagee would be entitled to claim interest without giving any credit for the rent for the period 1923 to 1930. But the mortgagee actually sued the mortgagor for rent and he obtained a judgment in his favour. That judgment at the date of the filing of the redemption suit had become time-barred, and although that judgment was unenforceable, the mortgagee still contends that notwithstanding, the judgment and notwithstanding the fact that the judgment is unenforceable he is entitled to claim the full interest without giving any credit in repeat of the amount covered by the judgment. In our opinion, the true position in law is that when the mortgagee obtained judgment for rent against the mortgagor, the liability of the mortgagor to pay rent came to an end and that liability became merged in the decree of the Court. Therefore, as far as the liability to pay rent was concerned, that liability was satisfied and the claim of the mortgagee against the mortgagor was no longer in respect of rent but was in respect of a judgment debt. It would have been open to the mortgagee be enforce that judgment debt against the mortgaged property because in obtaining judgment what the mortgagee was doing was to recover part of his mortgage debt As the rent was to be credited to interest, in suing for rent he was enforcing his mortgage debt, and therefore when he obtained the judgment, that judgment was in respect of the mortgage debt. As that mortgage debt was secured on the mortgaged property, it would have been open to the mortgagee to proceed against the mortgaged property in respect of the judgment-debt. If, therefore, the decree which the mortgagee obtained had been an enforceable decree, it would be open to him. in the redemption suit be say,
'I have an enforceable claim against the mortgaged property and till that claim is satisfied I am note bound to reconvey that property.'
But in this case the judgment is no longer anenforceable judgment; it has become barred. The mortgagee could not have enforced this judgment against the mortgaged property, andtherefore it is not open to him to say in the redemption suit filed by the plaintiff that the amount of the judgment-debt is secured by the mortgaged property. Nor can he say that he is not bound to account for the rents which the mortgagor was liable to pay, because as we have said before the question of rent no longer arises. It is a question of a judgment in which the rents have become merged and which were secured by the mortgaged property. Therefore, in our opinion, the mortgagee is bound to givecredit for the judgment which he obtained against the mortgagor and which he allowed to become time-barred. He is entitled to his interest at 10 per cent., undoubtedly, but from that amount must be deducted the amount covered by the judgment which the mortgagee obtained against the mortgagor. Mr. Kotwal contends that if there was a merger at the timewhen the mortgagee obtained a decree against the mortgagor, then there is no reason why the position should alter because the decree has become time barred. But if the decree had been satisfied by the mortgagor or if the decree had been assigned by the mortgagee, Mr. Kotwal concedes that the position would have been different and he would have been bound to give credit for the amount covered by the judgment. We fail to understand what the difference in principle is between a decree which is assigned and a decree which is satisfied and the decree which has become unenforceable by being barred by limitation. An enforceable decree can be enforced by the mortgagee because the Court permits him to do so only on the express condition that satisfaction must be entered upon the decree. Therefore, although he is proceeding against the mortgaged property in respect of the amount covered by the judgment, he is really enforcing the decree andobtaining satisfaction for the decree. But in this case it is not open to the mortgagee to obtain satisfaction because the decree has become barred by limitation.
4. Turning to the authorities, Mr. Kotwal has been able to find only one decision in which a decree obtained by the mortgagee has become barred by limitation. The other cases which are referred to in text books are cases where the decree in favour of the mortgageewas within time and enforceable. As we pointed before, the position where a decree is still within time is entirely different from the position where the decree hag become unenforceable. The only case we have of a decreebarred by limitation is the case reported in Mangeshwar Naraina Rao v. Shiva Rao 41 Mad. 1043 : A. I. R. 1919 Mad. 59. In that case there was a mortgage by way of conditional sale and the mortgage deed provided for the payment of rent by the mortgagor. It also provided that in default of payment of rent the mortgagee may immediately take possession of the property and there wag a provision that till possession was taken the mortgagor was to pay so much rent as would fetch interest at the rate of 12 per cent. per annum. The mortgagor failed to pay rent and the mortgagee filed a suit and obtained a decree and he allowed the decree to become barred. The mortgagor filed a suit for redemption. A Bench of the Madras High Court consisting of Phillips and Krishnan JJ., held that the mortgagee was not entitled to claim the rents in respect of which the decree was obtained and which decree had become barred by limitation. Phillips J., came to that conclusion on the ground that the mortgagee had abandoned his remedy against the mortgaged property and had chosen to obtain a decree. He also put it on the ground of election. Krishnan J.--and with respect it seems to us that that is the better opinion--took the view that on the mortgagee obtaining the decree there was a merger and the claim of the mortgagee was taken out of the operation of the contract between the parties and passed into the domain of judgment. Thereafter it was not open, according to the learned Judge, to either party to ignore the decree and fall back upon their antecedent rights and obligations. The learned Judge went on to observe that although the arrears of rent had become merged in the decree, the charge did not become extinguished and that charge attached, to the decretal amount as far as it represented the original rent. If the decree was satisfied or assigned away by the mortgagee, he could no longer enforce that charge, and the learned Judge said that on the same principle if the decree ceased to be enforceable by limitation, the charge also failed. With respect, we entirely concur in these observations of Krishnan J. Mr. Kotwal has attempted to distinguish this case by pointing put that there was no independent stipulation in this case for the payment of interest. But it is clear that both the learned Judges came to their conclusion on the basis that there was a liability to pay interest by the mortgagor. In our opinion, the distinction relied upon by Mr. Kotwal is not the distinction on which the ratio decidendi of the case is based.
5. Mr. Kotwal has also relied on a judgment of the Lahore High Court which considered the Madras decision to which we have just referred, and that is Ghulam Mohammed v. Rajeshwar A.I.R. 1940 Lah. 333: I. L. R. (1940) Lah. 658. In that case the mortgagor made a default in the payment of rent and the right to recover rent was time-barred, but there was no decree obtained by the mortgagee. It was on those facts that the Lahore High Court came to the conclusion that the mortgagee was not bound to give credit for the rent which he had not recovered and which bad become time-barred. It would be observed that in that case no question of merger arose. The mortgagee being in possession and not having in fact recovered any rent from the mortgagor, he could not be made to render accounts in respect of those rents, and the mortgagor himself not having paid rent could not charge the mortgagee with wilful default. The learned Judges of the Lahore High Court also point out that in the Madras case the landlord actually obtained a decree for arrears of rent but had failed to execute it within the period prescribed by law. That, with respect, is the correct distinguishing feature of the Madras judgment and because that feature was, absent in the case before the Lahore High Court, the Lahore High Court came to the conclusion that it did. Our attention has also been drawn to a decision of the Privy Council in Hewanchal Singh v. Jawahir Singh 16 cal. 307 . In that case a decree had been obtained by the mortgagee in respect of interest due under the mortgage before the mortgagor filed a redemption suit. Their Lordships in a very brief judgment took the view that the obtaining of a decree by the mortgagee did not amount to tender or deposit of interest by the mortgagor. It should be noted that the decree which the mortgagee had obtained was an enforceable decree at the date the redemption suit was filed. Therefore this case is not of much assistance to us when we are considering the effect of a decree in favour of the mortgagee which has become unenforceable by reason of limitation.
6. Therefore, in our opinion, the lower appellate Court was right in relying on Mangeshwar Naraina Rao v. Shiva Rao 41 Mad. 1043; A.I.R. 1919 Mad. 59, and coming to the conclusion that the mortgagee was liable to deduct from the amount of the interest which he claimed on the mortgage debt the amount of the judgment which he had recovered against the mortgagor and which he had allowed to become time-barred.
7. There is one other matter which arises on this appeal and that is with regard to the costs of two suits which have been referred to in the judgment as Katke's suit and Pange'ssuit, the costs of which were claimed by the mortgagee. Both those suits were defended by the mortgagee as the title of the mortgaged property was in jeopardy, and it is well settled that any costs incurred by the mortgagee in defending the title of the mortgaged property are liable to be paid by the mortgagor. The lower appellate Court has not disputed that principle, but it has refused to allow these costs because the mortgagee obtained the costs of these suits from the other party by the decree of the Court and no attempt whatever was made by the mortgagee to recover these costs. No execution was taken out and no attempt was made by the mortgagee to show that he had failed to obtain these costs from the other party. On these facts the lower appellate Court rightly came to the conclusion that the mortgagee was not entitled to debit the mortgagor in his accounts with these costs.
8. The result of the appeal is that it fails and must be dismissed with costs. [The rest of the judgment is not material to this report.]
9. The result will be that the decree passed by the lower appellate Court will be modified in the sense we have indicated in the judgment Cross-objections partly succeed. No order as to costs of the cross-objections.