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Mulraj Virji Vs. Nainmal Pratapchand - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtMumbai
Decided On
Case NumberO.C.J. Suit No. 620 of 1941
Judge
Reported in(1941)43BOMLR890
AppellantMulraj Virji
RespondentNainmal Pratapchand
DispositionSuit dismissed
Excerpt:
.....redeem--injunction.;the expression 'power of sale' is a well-known expression in conveyancing. the words 'power of sale,' as used in section 69(c) of the transfer of property act, 1882, refer to a clause to be expressly included in a deed of mortgage. they must therefore be understood to mean what is ordinarily known and understood in conveyancing by that expression.;a power of sale includes all steps which are necessary to be taken in that connection. in order to make the power bad words must be pointed out in section 69 which render the whole power invalid according to law.;where a party contends that a clause conferring a power of sale on the mortgagee restricts in any way the liberty of the parties to enter into a contract, the burden is on him to show that the words of the section..........anything in section 69 which in any way is in conflict with or different from the english act. the words 'power of sale' are not defined anywhere in the act. if it is a technical expression it would not be improper for the court to find out its meaning as judicially interpreted. pitamber v. vanmali was decided before the transfer of property act of 1882 was enacted and can therefore be safely relied upon to construe the words 'power of sale' in connection with a mortgage. the words used in section 69 are '. . . a mortgagee . . . . shall, subject to the provisions of this section, have power to sell' &c.; and the insertion of a clause giving such a power when the property is situate in one of the presidency towns or the towns mentioned in sub-section (c) is valid. it may be noted that in.....
Judgment:

Kania, J.

1. This is a suit by a mortgagor against his mortgagees to prevent them from exercising their power of sale. Although in the plaint several averments are made in respect of the sale intended to be held on May 8, 1941, the relief asked for is not in respect of that particular sale. The plaintiff contends that the power of sale contained in the mortgage deed is invalid and inoperative and it should be declared that the defendants are not entitled to exercise the same. These two. prayers are followed by a prayer for injunction. No other relief is sought in the suit.

2. The mortgage was executed by the plaintiff on April 18, 1940, and the due date was July 18, 1940. From the pleadings it is clear that the due date has expired and the mortgagor (plaintiff) has failed to pay the mortgage debt. There has been no offer to redeem the mortgage.

3. The first contention raised on behalf of the defendants is that the suit as framed is not maintainable. It was argued that a mortgagor must file a suit for redemption and offer to pay the mortgage debt after the due date has expired if he wants any relief against the mortgagees who are acting under the mortgage deed. The plaintiff relied on three cases, Jagjivan Nanabhai v. Shridhar Balkrishna Nagarkar (1877) I.L.R. 2 Bom. 252, Jerup Teja & Co. v. Peerbhoy (1920) 23 Bom. L.R. 1241 and Mohidin Shakkar v. Jehangir Dinshaw (1940) 43 Bom. L.R. 553. The Advocate General for the plaintiff strongly relied on the last case where it was observed that a mortgagor can ask for an injunction in the event of the mortgagee attempting to exercise his power of sale improperly or irregularly. In the first case the suit was filed for redemption and the Court held that even after such a suit was filed the mortgagee could exercise the power of sale contained in the mortgage deed and cannot be restrained from exercising his power of sale merely because of the redemption suit. Pinhey J., in the course of his judgment, observed (p. 256):

The mortgagor is entitled to have the sale of the property suspended only if he can shew either that he has paid off the mortgage lien or that he has made a legal tender of the amount due which has been refused.

In Jerup Teja & Co. v. Peerbhoy the due date had not arrived and the mortgagee had threatened to sell the property although the mortgage debt had not become due. That is clearly a different set of facts from what is found here. In Mohidin Shakkar v. Jehangir Dinshaw B.J. Wadia J. in the course of his judgment expressly stated (p. 557):

No case was cited before me to show that if the right to redeem had not accrued to the mortgagor he could not bring in a suit for an injunction restraining a wrongful sale, but that his only remedy was either to pay or tender the moneys and allow the property to be sold, and then pursue his remedy in damages if any.

The facts there clearly show that the mortgage debt was alleged by the mortgagee to be due, while it was contended by the mortgagor that the event on which the due date was accelerated either had not happened or that the mortgagee had not exercised his option to call in his mortgage amount on the happening of such an event. It was therefore contended by the mortgagor that the mortgage debt had not become due.

4. The observations in each individual judgment have to be read in the light of facts found in the case, and under the circumstances it does not appear to me that any of the three cases relied upon by the plaintiff sustains the contention that after the mortgage debt has become due the mortgagor is entitled to file a suit to restrain the mortgagee from exercising the power of sale without offering to redeem and tendering the amount. I have already pointed out that in this case the plaintiff does not suggest that the mortgage debt has not fallen due. The plaint admits that it has fallen due.

5. The contract between the parties is found in the indenture of mortgage. By that document the plaintiff had stipulated that he would pay the mortgage amount on July 18, 1940, to the mortgagees. The present demand on the part of the plaintiff is to enforce his right under that contract although he has committed a breach of one of the most important terms of the same. The argument of the defendants is that as the plaintiff has committed a breach of the contract he has no right to come to Court and seek to enforce it against the defendants. It is argued that relief by way of injunction is granted on the same principles on which the Court will order specific performance, and in this case if the plaintiff had asked for specific performance of this contract the Court would have refused it because the plaintiff himself had committed a breach thereof. The Court should similarly refuse the relief by way of injunction. In my opinion there is considerable force in this contention. The relief by way of injunction is always discretionary and the Court will be slow to grant such a relief to a party who admits that he has committed a breach of the contract and at the same time wants to prevent the opposite party from enforcing his rights under the contract. Moreover the relief by way of injunction should in this case be very well and properly accompanied by a prayer for redemption. If the plaintiff chooses to refrain from carrying out his obligations and prays only for an injunction, it is difficult for the Court to exercise a discretion in his favour. To permit the plaintiff to do so would mean that the plaintiff can persist in his breach and prevent the defendants from enforcing their rights under the contract. Moreover in this case the express terms of the contract contained in the mortgage deed show that if the power of sale was exercised improperly or irregularly or that the same was unnecessary, the remedy of the plaintiff in respect of any breach of the proviso was to be in damages only. That is the usual clause in a mortgage deed and is inserted for the benefit of the mortgagor as well as the mortgagees. Without such a clause if an objection is taken to the sale at the time of the auction, the purchaser may be scared away and may not offer a proper price. In order, therefore, that the purchaser may give a proper value this clause is found in mortgage deeds. By that clause it is clear that the parties had stipulated that in the event of an improper, irregular or unnecessary exercise of the power of sale the remedy of the aggrieved party was to be only in damages. Having regard to this clause the Court will be most reluctant to give an injunction to the mortgagor. In my opinion, the suit as framed is not maintainable and the mortgagor should pray for redemption before asking the Court to intervene and grant an injunction restraining the defendants from exercising their power of sale. This leaves the question whether the power of sale is wholly illegal.

6. On the merits an interesting argument was advanced on behalf of the plaintiff. It was contended that by Section 69 of the Transfer of Property Act the legislature had provided that in certain cases only a mortgage deed might contain a power of sale. Relying on the words of Section 69 it was argued that the power of sale should be without any additions, limitations or ancillary rights. The power of, sale in this case is in the following terms:--.And it is hereby agreed and declared that notwithstanding anything contained in the Trustees and Mortgagees Powers Acticle 1886, it shall be lawful for the mortgagees or any person acting on their behalf at any time or times hereafter as well before as after the due date without any further consent on the part of the mortgagor to sell or to concur in the sale of the mortgaged premises hereby mortgaged and granted or expressed so to be or any part or parts thereof without the intervention of the Court and either together or in parcels or lots and either by public auction or private contract and either with or without any special conditions or stipulations relative to title or evidence of commencement of title or otherwise which may be deemed proper by the mortgagees with power to postpone such sale from time to time and to buy in the said hereditaments and premises or any part thereof at any sale by public auction or to rescind or vary any contract for the sale thereof and to resell the same from time to time being not answerable or responsible for any loss or diminution occasioned thereby and for the purposes aforesaid or any of them to make agreements execute assurances give effectual receipts or discharges for the purchase money and do all other acts and things for completing the sale which the person or persons exercising the power of sale shall think proper AND the aforesaid power shall be deemed to be a power to sell or in selling without intervention of the Court within the meaning of section 69 of the Transfer of Property Act, 1882.

It was contended that this was not authorised by Section 69 of the Transfer of Property Act and therefore the power was invalid. It was argued that this power was one and indivisible and as it was bad the mortgagees had no right to sell the property without the intervention of Court. In this connection it was pointed out that the draftsman of the indenture of mortgage had committed the error of borrowing the form from English forms and precedents. It was argued that the law in England was different and therefore this form could not be properly adopted for mortgages in India having regard to the provisions of the Transfer of Property Act.

7. In my opinion this contention of the plaintiff is unsound. The first statute enacted in England incorporating the rights of the mortgagees was 23 & 24 Vic. Clause 145 (Lord Cranworth's Act) of 1860. Even before that in Davidson's Conveyancing Precedents of 1858 (Vol. II, p. 760) a form of mortgage with a power of sale worded exactly as in this case is shown to be the usual form. The Act of 1860 recognised that this power was commonly inserted in mortgages. This is made clear by the preamble to that Act. By the Act it was presumed to exist. Next came the Conveyancing Act of 1881 (44 & 45 Vic. Clause 41). Section 19 of that Act recognised this as an implied power of sale in the mortgagee. At present the Law of Property Act of 1925 (15 Geo. V, Clause 20), Section 101, governs the rights of the parties in England. By Section 101(1)(i) it is provided that such a power of sale is implied in favour of a mortgagee. The expression 'power of sale' thus appears to be a well-known expression in conveyancing. In Davidson's Precedents printed in 1858 the marginal note against a clause worded as here is 'power of sale.' In India the same expression is known and has been understood in the same way so far back as 1875 in Pitambar Narayendas v. Vanmali Shamji (1875) I.L.R. 2 Bom. 1.

8. On behalf of the plaintiff it was argued that this is an incorrect way of approaching the case. The English law should not be looked at and a reference to the precedents there is not relevant. The Court has to consider only Section 69 of the Transfer of Property Act. I concede that in interpreting Section 69 English statutes cannot govern the plain meaning of the words used in it. But I am unable to find anything in Section 69 which in any way is in conflict with or different from the English Act. The words 'power of sale' are not defined anywhere in the Act. If it is a technical expression it would not be improper for the Court to find out its meaning as judicially interpreted. Pitamber v. Vanmali was decided before the Transfer of Property Act of 1882 was enacted and can therefore be safely relied upon to construe the words 'power of sale' in connection with a mortgage. The words used in Section 69 are '. . . a mortgagee . . . . shall, subject to the provisions of this section, have power to sell' &c.; and the insertion of a clause giving such a power when the property is situate in one of the Presidency towns or the towns mentioned in Sub-section (c) is valid. It may be noted that in Sub-section (c) the words used are 'Where a 'power of sale' without the intervention of the Court is expressly conferred on the mortgagee . . .' The words 'power of sale.' used in Sub-section (c) refer to a clause to be expressly included in the mortgage. They must be understood therefore to mean what is ordinarily known and understood in conveyancing by that expression.

9. The argument of the plaintiff based on the construction of the words used in this case is also unsound. A power of sale must include all steps which are necessary to be taken in that connection. In order to make the power bad words must be pointed out in the section which render the whole power invalid according to law. It should be remembered that as between adults the law permits the greatest freedom of contract unless it is expressly taken away. Therefore if the plaintiff contends that this particular clause restricts in any way the power of the parties to enter into a contract, the burden is on him to show that the words of the section prevent an agreement between the parties as embodied in the document. I am unable to find any words in Section 69 which prevent the parties from entering into the contract found in this mortgage deed. It was argued that under Section 69 a mortgagee had no power to postpone the sale. I am unable to accept that contention. A power to sell must necessarily include a power to postpone the sale. It is a power to sell either now or at a later date. I do not think that expression is against the words used in Section 69. It was contended that the power to buy in, or rescind or vary any contract for sale was bad and against the words of Section 69. This argument is based on a misapprehension. The words used are not 'buy out' but 'buy in.' No mortgagee has a right to buy the mortgage premises without an express authority from the Court. If he attempted to buy directly or indirectly, on proof that the transaction was of that nature, the Courts have always held that the mortgage subsisted and the transaction of sale was a nullity. I do not think the expression 'buy in' has ever been intended to give the mortgagee that right. It should be realised that if at an auction sale there are several intending purchasers and the highest bid is very inadequate, a way has to be found by which the property is not sold to the highest bidder and cause a tremendous loss both to the mortgagor and the mortgagee. The expression 'buy in' is therefore used so that in effect the party at whose instance the auction is held takes the property out of the auction. The only way in which the auction can be closed is by such an offer being given and the property not being knocked down to an outsider. The expressions used after the words 'buy in' make this position very clear. The mortgagee is given a right to buy in or to rescind i.e. to set aside the contract of buying or vary any contract for sale and to resell the same. Therefore when an auction sale is found not to result in realising the proper value, the mortgagee may either postpone the sale, or if he finds that he is unable to do so because the auction sale had started, he has to resort to the second way to prevent the property being knocked down at an undervalue and to resell the same. I do not think, on a true interpretation, the clause relating to the power of sale gives the mortgagees a right to buy the property for themselves. Unless that construction is put on this clause there is nothing to violate the words 'power to sell' used in Section 69. In my opinion, therefore, this clause does not violate Section 69 in any manner and the power is valid.

10. It was argued that if a portion of the power is bad the whole power is bad because it is one and indivisible. Having regard to the view which I have taken, I do not think it necessary to discuss this aspect of the case.

11. My findings on the issues are: No. 1 in the negative; No. 2: The power is valid; No. 3 in the affirmative and No. 4 in the negative. The suit is, therefore, dismissed with costs. The interim injunction granted on May 8, 1941, is dissolved. Costs to include costs reserved. The mortgage deed provides that if the mortgagees' rights have to be defended in any manner the mortgagees will be entitled to claim their costs when taxed as between attorney and client. Ordinarily I am reluctant to award costs taxed otherwise than between party and party, but in the present case the mortgagor himself has challenged the mortgagees' title and has attacked the right found in the contract. I, therefore, award the defendants costs against the plaintiff when taxed as between attorney and client.


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