1. The question of law in this case is whether the present suit is barred under Section 13 of the Civil Procedure Code. The facts material for the point may be stated thus. The appellant mortgaged his property to the respondent in 1884 on the terms that the mortgagor should redeem it on pay. ment of the principal and that the mortgagee should be in possession and enjoy the profits in lieu of interest. It was, in short, a usufructuary mortgage. It is common ground that the respondent as mortgagee went into possession under these terms. In 1901 the appellant tendered the amount of the principal to the respondent but it was not accepted, The appellant in consequence filed a suit under Section 62 of the Transfer of Property Act to recover possession of the mortgaged property and at the same time under Section 83 of the Act deposited the amount of the principal in Court as the amount payable on the mortgage. The Court passed a decree for possession as claimed by the appellant. The suit which has led to this second appeal was brought by him to recover mesne profits from the respondent from the date of the deposit to the date when he recovered possession of the mortgaged property from the respondent in execution of the redemption decree in the previous suit. The lower Court has disallowed the claim for mesne profits on the ground of res judicata.
2. The question in this second appeal is whether that is right. Its determination depends upon the nature of the legal relation in which the parties stood to each other during the period to which the mesne profits claimed by the appellant relate. In other words, the question is, did the respondent continue in possession of the property after the date of 'the deposit as a mortgagee, with a liability to restore the property to the appellant and account for the profits arising in consequence of his refusal to accept a tender properly made by the appellant, or did he from that date cease to be a mortgagee and become a trespasser pure and simple liable to be ejected as holding the property wrongfully ?
3. The answer to this question is supplied by the material provisions of the Transfer of Property Act. By Section 58 of that Act the terms mortgagor and mortgage are defined.
4. A mortgage means 'the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced.' The transferor is called a mortgagor; the transferee a mortgagee. Where the mortgage is usufructuary, the mortgagee enters into possession under his contract and it is undisputed that till a proper and legal tender of the amount due on the mortgage is made he holds possession in that character. Does he lose that character and become a trespasser if and when the tender is refused According to Section 60 of the Transfer of Property Act, after such tender the mortgagor has a right to require 'the mortgagee' to deliver possession of the property to him; and such right, according to clause 3 of the section, 'is called a right to redeem.' If that is the legal nature of the right, the mortgagee, though holding possession contrary to the terms of the mortgage, continues as mortgagee. And Section 62, Clause (b), provides that 'in the case of a usufructuary mortgage the mortgagor has a right to recover possession of the property' 'where the mortgagee is authorised to pay himself from such rents and profits the interest of the principal money when the term (if any) prescribed for the payment of the mortgage money has expired and the mortgagor pays or tenders to the mortgagee the principal or deposits it in Court, as hereinafter provided.''
5. It is significant that in none of these sections does the Legislature say that when a proper tender has been made and refused or the amount properly tendered deposited in Court; the mortgagee ceases to have that character or that his interest in the property as transferee defined by Section 58 is extinguished so as to make him a mere trespasser. That the said interest still continues is made more explicit in Clause (i) of Section 76, which provides that ''when the mortgagor tenders or deposits in manner heroin-after provided the amount for the time being due upon the mortgage, the mortgagee must, notwithstanding the provisions in the other clauses of this section, account for his gross receipts from the mortgaged property from the date of the tender, or from the earliest time when he could take such amount out of Court as the case may be. '
6. That is, from the date of the tender or of the deposit, as the case may be, the mortgagee continues as mortgagee but with a statutory liability to account for the profits received by him from that date. He is not then a mere trespasser but a mortgagee still, holding the property as a kind of trustee for the mortgagor and as such accountable to the latter for the profits. Such is the character, according to the Act, of the mortgagee's possession after he has rejected a legal tender and the Act in that respect follows the rule of English law, stated by Mr. Ashburner at page 258 of his 'Principles of Equity/' that 'a mortgagee only becomes a trustee for the mortgagor after he has been paid.'The same rule is stated in other words by Mr. Ashburner as follows, in his Treatise on Mortgages:-'In the case of a mortgage, whether of land or chattels, a tender properly made and improperly rejected, neither extinguishes the mortgage debt nor determines the mortgagee's property in the security. Bank of New South Wales v. O'connor (1889) 14 App. Can, 273; Johnson v. Diprose 18931 1 Q.B. 517.
7. If that is the law, the profits derived by the mortgagee after a proper tender made or after the amount due has been deposited in Court, are profits for which he has to account to the mortgagor in virtue of a liability tacked on, so to say, by the statute to the mortgage contract and as such a claim to them by the mortgagor is one arising from and connected with his right to redeem or recover possession of the property. It is all one cause of action which might and ought to be alleged by the mortgagor in his suit to recover possession. (Expln. II to Section 13 of the Code of Civil Procedure). The appellant having failed to ask for mesne profits in the previous suit, his present claim is barred either under that section or under Section 43 of the same Code.
8. The decree is confirmed with costs.