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Jerup Teja and Co. Vs. Peerbhoy Adamji Peerbhoy - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtMumbai
Decided On
Case NumberO.C.J. Appeal No. 62 of 1920
Judge
Reported inAIR1921Bom421; (1921)23BOMLR1241
AppellantJerup Teja and Co.
RespondentPeerbhoy Adamji Peerbhoy
DispositionAppeal allowed
Excerpt:
.....intervention of the court within the meaning of section 69 of the transfer of property act. the power of sale was not to be exercised by the mortgagee unless default was made in payment of the principal sum or any part thereof on the day appointed for the payment and for the pare of three calender months next after the notice required by section 69(1) of the transfer of property act or unless and until interest amounting to at least rs. sou was in arrears and remained unpaid for three months after becoming due. interest amounting to rs, 13, 93 fell in arrears for three months and the second mortgagee advertised the property for sale. the fourth mortgagee (the plaintiff), thereupon, tendered to him the amount of interest due and asked him to stop the auction sale; and also offered to..........being in arrears the whole of the money had become payable, a puisne incumbrancer could stop the sale by payment only of the interest due, that is to say, by removing the cause which gave rise to the power of sale being exercised.10. it is true that in doolabhdas v. chhabildas (1899) 1 bom. l.r. 273. mr. justice starling expressed an opinion that where a mortgagee exercises a power of sale owing to interest having fallen into arrears, the mortgagor, if he wished to stay the sale, need pay up only all the interest that was due up to the date of payment. but in that case it was admitted that the whole of the principal had become due and though on strict principles of equity it might seem reasonable that a mortgagor should be entitled to be relieved from his property being sold if he paid.....
Judgment:

Norman Macleod, Kt., C.J.

1. One Peerbhoy Adamji Peerbhoy is entitled to a one-sixth share in certain property. The plaintiffs in this suit are the fourth mortgagees of 'that one-sixth share. They filed this suit against the mortgagor, and the first, second, third and fifth mortgagees praying (I) that the first defendant might be ordered to pay them the mortgage money with interest; (2) that it might be declared that the third defendant, the second mortgagee, was bound to accept from the plaintiffs the amount of interest in arrears; (3) that the third defendant might be restrained from proceeding further with the sale of the said share, and for further and other relief.

2. The necessity of the suit arose from the fact that the third defendant advertised the mortgaged property for sale subject to the interest of the first mortgagee. The plaintiffs moved for an interim injunction restraining the third defendant from proceeding with the sale, but the lower Court refused to grant the injunction, and the plaintiffs have appealed to this Court against that order.

3. Two questions arise (1) whether the conditions exist which enable the second mortgagee to exercise his power of sale, and (2) whether, assuming those conditions do exist, the Court, on the application of the fourth mortgagee, would stay the sale on the interest due to the second mortgagee being paid. The provisions of the Transfer of Property Act apply to this case, and with regard to the first question, the answer depends entirely upon what the parties had contracted to do subject to the provisions of the Transfer of Property Act. The second mortgage was created by the first defendant on the 6th of May 1920 and the date of repayment of the mortgage money is the 6th day of May 1921. There is a covenant to pay interest by equal quarterly payments by the sixth day of each and every quarter, interest remaining unpaid and in arrears being added to the prinoipal carrying interest at the same rate. Then there is a covenant by the mortgagee to reconvey on the prinoipal and interest being repaid on the due date, but if there was default in such repayment, the mortgagee was not bound thereafter to accept payment of the mortgage debt or to reconvey the mortgaged premises unless three months' notice had been given, provided that if at any time during the continuance of the security any damage would happen to the mortgaged premises by fire, tempest or otherwise to impair the security, or if the mortgagor had become or should be adjudicated insolvent, then the moneys for the time being due and owing on the security of the mortgage should at the option of the mortgagee become payable as if the due date had then elapsed. Then it was further agreed that it should be lawful to the mortgagee to sell the mortgaged premises under the power of sale contained in the mortgage which was deemed to be a power to Bell or concur in selling the said mortgaged premises in default of payment of the mortgage debt without the intervention of the Court within the meaning of Section 09 of the Transfer of Property Act. Provided that the power of sale should not be exercised by the mortgagee unless default had been made in payment of the principal sum or any part thereof on the day appointed for the payment thereof and for the space of three calender months next after the notice in writing required by Clause (1) of Section 69 of the Transfer of Property Act or unless and until interest amounting at least to Rs 500 should be in arrears and remain unpaid for three months after becoming due.

4. It is admitted that interest amounting to Rs. 500 was in arrears for three months after becoming due, and the third defendant contended that he was entitled to sell under his power of sale contained in this mortgage. On the other hand the appellants have urged that the power of sale can only be exercised under the deed and under the provisions of the Transfer of Property Act, if there has been default of payment of the mortgage money, and default could only happen if the mortgage money had become payable. It seems to hive been conceded by both sides that the power of sale cannot be exercised unless there has been a default of payment of the mortgage money which includes not only the interest but the principal. But it was argued that if there was default in payment of interest for three months thereupon the principal became payable and that therefore the power of sale could be exercised. But there in nothing in the mortgage deed, which is the contract between the parties, from which we can assume that the parties contracted that if interest remained unpaid for three months the principal also became payable.

5. We have been referred to a number of English cases on the question when the right of foreclosure will accrue to a mortgagee, but as far as I can see, we are bound by the provisions of the Transfer of Property Act, and as it has often been laid down by the Privy Council, it is of little use to refer to English cases on the law of mortgage. It had been open to the parties to contract specifically that if interest remained unpaid for three months, then the whole of the principal would become payable and that therefore the mortgagee could exercise his power pi sale. But the parties have refrained from expressly contracting to that effect, and there is nothing, as far as I can see, in the mortgage deed from which it can be presumed, apart from the express contract, that the principal became payable as soon as interest fell into arrears for three months.

6. We have also been referred to the provisions of the Conveyancing Act of 1881 with reference to the statutory power of Bale, and it seems that the provisions of Sections 18 and 19 of that Act were before the Legislature when the Transfer of Property Act was drafted. It has been argued that because the power of sale which is referred to in the first part of Section 69 shall not be exercised inter alia unless interest amounting to at least Rs. 500 is in arrears and unpaid for three months, and because the first part of Section 69 refers to a power of sale in default of payment of the mortgage money, therefore it must follow that the default in payment of interest for three months amounts to default of payment of the mortgage money. It appears to me that that- argument is unsound, and we have been referred to no authority which can support it. The passage in Volume VIII of the Encyclopaedia of Forms and Precedents, p. 471, to which we have been referred, is certainly against the argument.. At p. 472 the author says:

If the mortgage is for a term certain, e. g., seven years, an unskilful draftsman might inadvertently tie the mortgagee's hands for the whole of the period, even although interest were largely in arrear. the proper way to obviate this is to make the principal repayble six months after date, and then to provide that interest is punctually paid and the mortgagor's covenants &c.; duly observed and performed other than the covenant for payment of the principal debtl the mortgagee will not call in the money for the agreed period. By this device, if interest is allowed to fall into arrear, the principal becomes immediately due, and the statutory power becomes exercisable when the interest is overdue for two months.

7. Now in this case the period of the mortgage is one year instead of six months and there is no provision that the mortgagee will not call in the money for a further period of years if the interest is paid regulrly. But the conditions in the mortgage are in the usual form, and we may take it that the intention was that the money should be advanced for a year certain, and that if the mortgagee was willing and the mortgagor paid the interest regularly under the terms of the mortgage deed after the expiration of the year, the mortgage would continue. But there is nothing in the deed which would lead us to suppose that the parties intended that the power of sale should be exercised before the expiration of that year, unless either the premises were damaged by fire or some other cause or the mortgagor became or was adjudicated insolvent.

8. Therefore, in my opinion, the conditions do not exist in this case which would entitle the third defendant to exercise the power of sale in his mortgage, and, therefore, there must be an injunction to restrain the third defendant from selling pending the hearing of the suit. Of course that will not prevent the third defendant from exercising any powers which he may have under the mortgage, apart from the conditions which are mentioned in this particular case.

9. We may say a few words with regard to the contention of the appellants, that as puisne incumbrancers they would be entitled to prevent the third defendant from selling on payment of the interest in arrears, If, owing to the interest being in arrears and owing to the agreement between the parties, the whole of the mortgage money has become payable, then it seems obvious to me that the puisne iucumbrancer could only stop the sale it he Paid the money that was due, that is to say, the principal and interest. No authority has been cited for showing that if a prior mortgagee was attempting to sell the mortgage premises because owing to interest being in arrears the whole of the money had become payable, a puisne incumbrancer could stop the sale by payment only of the interest due, that is to say, by removing the cause which gave rise to the power of sale being exercised.

10. It is true that in Doolabhdas v. Chhabildas (1899) 1 Bom. L.R. 273. Mr. Justice Starling expressed an opinion that where a mortgagee exercises a power of sale owing to interest having fallen into arrears, the mortgagor, if he wished to stay the sale, need pay up only all the interest that was due up to the date of payment. But in that case it was admitted that the whole of the principal had become due and though on strict principles of equity it might seem reasonable that a mortgagor should be entitled to be relieved from his property being sold if he paid off the interest, still there is no authority on the question either in this country or in the English Courts. Therefore, in this case, it is unnecessary for us to express any opinion upon it.

11. The appeal must be allowed and the injunction must go. The appellants will get their costs of the appeal from the third defendant who must pay his own costs while the costs of all parties in the Court below and the costs of the other parties in appeal other than the appellants and the third defendant will be costs in the cause.

Shah, J.

12. I agree.


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