1. A Bench of this Court, of which one of us was a, member, remitted the following issue to the lower Court for finding:
what amount, if any, is due to the defendant-mortgagee from the mortgagors on the basis of the mortgage deeds dated 21st July 1880 and 27th July 1882.
2. For the detailed circumstances in which it was found necessary to have a finding on the above issue the remand order should be seen. For the purposes of our decision on the issue remitted to the lower Court whose finding is before us, it is necessary to state the facts very briefly. The defendant-respondents were mortgagees of a 12- biswansi share in a certain village under the deeds, one of 21st July 1880, and the other of 27th July 1882. The plaintiffs took a mortgage of the same share together with another share under a deed of a subsequent date. The defendant obtained a decree for sale on foot of their mortgages in 1886, and purchased the share themselves in execution of their decree. They obtained possession of the property and have been in possession ever since. They had omitted to implead the plaintiffs as a party, and the latter therefore were not bound by the result of that suit. The plaintiffs subsequently brought a suit on foot of their mortgage and had the same property sold. They were themselves declared to be the auction-purchasers in 1916. The suit, which has given rise to this appeal, was brought by the plaintiffs on 15th May 1928, for redemption of the mortgages in favour of the defendants, to which reference has already been made. It was alleged that the mortgage money due under the aforesaid deeds has been fully satisfied by the usufruct of the share which has been in possession of the defendant since 1886. The defendants denied this allegation and claimed a certain sum as a condition of redemption. They alleged that they were entitled to the entire decretal amount, with interest up to date. This Court held by its remand order that the plaintiffs were bound to pay to the defendants the amount due under the two mortgages. The issue remitted to the lower Court accordingly mentioned the question arising between the parties.
3. The lower Court has returned a finding which is not quite definite. It is pointed out that the defendants claimed by their written statement Rs. 1,926-2-6 which represent the mortgage money due under the two deeds on the date of the decree passed in their favour They claimed no interest subsequent to the date on which possession was delivered to them. They seem to imply that the plaintiffs should pay the same amount for redemption now as they would have had to pay if they had been impleaded and desired to redeem. The lower Court is however of opinion that, but for this defence the defendants would have been entitled to a larger sum of money representing the decretal amount above referred to and interest thereon up to date, the total of which comes to Rs. 6,457-12. Apparently the lower Court has left it to us to decide whether one or the other of the two figures should be considered to be the sum due under the two mortgages.
4. The learned Advocate for the plaintiff-appellants has raised a question which does not appear to have been considered by the lower Court. He argues that the account between the parties should be made up by giving credit to the defendants for interest accruing on the mortgages, but the profits derived from the property purchased by them should be sot off each year against the interest, and that so far as the profits were in excess of the interest each year, they should be set off against part of the principal. It is contended that if account be made on this footing, the entire mortgage money due under the mortgage deeds in question will be found to have been paid off and that some surplus is due to the plaintiff-appellants. Unfortunately the defendant-respondents are not represented before us. Their learned Counsel, Mr. Nanak Chand has stated that he has no instructions. From the pleadings and from the attitude they adopted when the order of remand was passed it is clear that they contested the appellant's right to have the profits set off against interest each year; and we cannot give effect to the plaintiff appellants' contention as if there is no contest on the point. The first question, therefore, which we have to decide is whether the plaintiff-appellants are in law, entitled to have the profits of the property purchased by the defendant-respondents in execution of their mortgage decree set off against the interest and, so far as it was in excess of the interest against the principal. Where a prior mortgagee obtains a decree on foot of his mortgage and purchases the mortgaged property in execution of his own decree, to which the puisne mortgagee was not a party, the sale cannot be considered to be of no effect at all. It effectively transfers the mortgagor's right to the prior mortgagee (auction-purchaser), as between the mortgagor and the prior mortgagee, though the sale is not binding on the subsequent mortgagee, who can, in spite of it, exercise his right of redemption. This has been held by a Full Bench of this Court in Mannu Mal v. Ram Chander 1931 All. 277. Applying that rule to the facts of the present case we have to accept the position that the mortgagors rights were transferred to the defendant-respondents in 1886; but the plaintiff-appellants, who were no party, are entitled to redeem. In the exercise of their right of redemption they are entitled to treat the prior mortgages as still subsisting. Not being bound by the decree they can ignore it. The necessary corollary to this is that account of the mortgage money is to be made up on the basis of the stipulations contained in the mortgage-deeds. In redeeming the mortgages they must pay the principal and interest calculated up to date. At the same time, the prior mortgagees who have been in possession of the mortgaged property by virtue of the auction-sale held in execution of their own mortgage decree, should account for the usufruct received by them. They have to do this, not because their possession can be traced to anything in the mortgages in their favour, which were simple, but to the fact that the usufruct received by them should be considered to be tantamount to payments made by the mortgagors. In thus connexion it should not be overlooked that as between the prior mortgagees and the mortgagors the latter's rights were assigned to the prior mortgagees under the auction-sale in lieu of the mortgage money. The prior mortgagees have been in receipt of the usufruct as against the mortgagor in consideration of the whole or part of the mortgage money which as against the mortgagors should be considered to have been wiped out. Any payments which the mortgagor. makes to the prior mortgagee enures for the benefit of the puisne mortgagee also. If the prior mortgagees be considered to be in possession of the mortgaged property under an arrangement made by the Court in the auction-sale on behalf of the mortgagor to the effect that the prior mortgagees may take possession of the mortgaged property and retain it as the owners thereof in full or part satisfaction of the mortgage money subject to the right of the puisne mortgagee's right to redeem, there can be no doubt that the usufruct received by the prior mortgagees under such arrangement should, in relation to the puisne mortgagee, be considered to be payments made by the mortgagor. Otherwise the prior mortgagees would have it both ways. On the one hand they insist on payment of the mortgage money consisting of the principal and interest calculated up to date, and on the other hand they are allowed to appropriate the usufruct which, but for the auction-sale in their own suit, would have been taken by the mortgagor. This view was taken by a Division Bench of this Court to which one of us was a party in Nannu Mal v. Ram Charan Lal 1930 All. 485. To the same effect is the view of the Madras High Court in Muthammal v. Ram Pillai 1918 Mad. 103, which was followed by this Court in the case referred to above. The Calcutta High Court has taken the same view in Jmamemdra Nath Singh v. Shoreshi Charan Mitra 1922 Cal. 23. There is a passage in Lalta Prasad v. Kafayat Husain 1933 All. 905, which is relied on in support of the contrary view. The question which the learned Judges were called upon to decide was not quite similar to the one before us. In repelling the contention that interest should cease from the date the prior mortgagee obtained possession under the auction-sale in his favour held in a suit on foot of his own mortgage, to which the puisne mortgagee was not a party, the learned Judges observed:
It is argued that as Lalta Prasad has obtained possession of the property, no interest should be allowed to him from the date of his obtaining possession. We think there is no force in this contention, as Lalta Prasad obtained possession of the property not as mortgagee but as an auction purchaser in execution of his own mortgage decree.
5. The view herein expressed is right so far as it goes. It is not open to the puisne mortgagee to say that, though he treats the prior mortgage as still subsisting, yet interest should be calculated only up to the date on which the prior mortgagee obtained possession after his purchase in his own suit against the mortgagor. The very hypothesis on which the puisne mortgagee claims redemption precludes the possibility of interest being calculated only up to the date when possession was obtained by the prior mortgagee under the sale in his favour. The puisne mortgagee must pay interest up to date since he treats the mortgages as still subsisting. The learned Judges do not go further than this. They did not hold that the usufruct received by the prior mortgagee in his capacity as auction-purchaser should not be set off against the mortgage money. They were not called upon to consider this question, the only argument before them being that interest should cease from the date of the auction-purchase by the prior mortgagee. It is true that the learned Judges allowed the entire principal and interest -without making any allowance for the usufruct for which no claim had been made and which had probably not been proved. As already stated, the question which has been raised was not considered by the learned Judges in that case. The passage quoted above is therefore no authority for the proposition contrary to that recognized in Nannu Mal v. Ram Charan Lal 1930 All. 485, and in the Madras and Calcutta cases, to which reference has already been made. The conclusion which we have arrived at is that while the defendant-respondents are, on the one hand, entitled to have an account taken of what is due to them under the mortgage-deeds of 1880 and 1882, they are, on the other hand, liable to give credit for the net profit received by them every year after they entered into possession.
6. The plaintiff-appellants are faced with a peculiar difficulty in showing that the mortgage money has been satisfied out of the usufruct. The mortgage-deed carries interest at the rate of Re. 0-14-0 per cent per mensem compoundable every year. The defendant-respondents obtained possession in 1886. It is not known what amount of principal, interest and compound interest was due to the prior mortgagees in 1886, nor is there any evidence to show whether in the years which followed the auction-sale the profits of the property were sufficient to pay the interest each year on the aggregate amount on which the interest was running. It is quite possible that for many years after 1886 the net profit was not equal to the interest which went on accumulating till it reached an unknown high figure. All that the plaintiff-appellants have been able to establish in the present case is that during the years ranging from 1327 Fasli (1920) to 1338 Fasli (1931), the profits of the property were in excess of the interest calculated on the original principal amount at the contractual rate. We cannot however assume that in 1920. (1327 Fasli) interest for all preceding years had been paid off, so that interest was running only on the original principal. As already pointed out, it is possible that the aggregate amount on which interest was running had swelled to a figure on which interest at the contractual rate exceeded the annual profit accruing between 1920 and 1931. In these circumstances, we cannot accept the contention put forward on behalf of the plaintiff-appellants that the entire mortgage money was satisfied by the usufruct and the next best thing that can be done for the plaintiff-appellants is to accept the defendants case that redemption may be allowed to the plaintiff on payment of Rupees 1,926-2-6 due under the two mortgages on the date when the defendants obtained possession.
7. The result is that we pass a decree, in supersession of the decree of the lower Court, for redemption on payment of Rs. 1,926-2-6. Parties shall receive and pay costs in proportion to success and failure. Three months' time is allowed for payment.