1. The widow and the son of the original plaintiff are the appellants in this second appeal against the reversing judgment dated 26-9-1950 of Sri D.N. Das, District Judge of Mayurbhanj, setting aside the judgment and decree passed by Sri T. V. Rao Subordinate Judge of Balasore, arising out of a simple suit for redemption by the original plaintiff-mortgagor.
Plaintiff's case is that the land in dispute originally belonged to one Bhagaban Panda who executed a registered Kabala (Ex. A) for a consideration of Rs. 2,000/- on 16-7-1924 in favour of the plaintiff. Plaintiff being the owner in possession of the land executed a usufructuary mortgage bond (Ex. B) for Rs. 1,500/- in favour of Luxminarayan Pani, the father of defendants 1 and 2 on 2-6-1928.
The mortgaged property was put in possession of the mortgagee under the terms of the mortgage transaction that the usufruct be appropriated towards interest and the land can be delivered back any year in the month of Magh after the expiry of the due date on payment of the principal amount.
Plaintiff averred that Luxminarayan and after his death the present defendants are in fact in terms of the bond in possession of the mortgaged property. According to the terms of the bond the mortgagor was to pay rent and, on his failure to pay if the mortgaged property is attached for arrears of rent, or put up for sale, the mortgagee was to pay the arrears amicably to the landlord or deposit the same in Court and release the property.
The plaintiff further averred that the mortgagor being not a resident of the district where the lands are situate the mortgagee undertook to pay the rent and the mortgagee was in fact amicably paying all the money due on account of rent, but nevertheless in collusion with the landlord and his agent, the mortgagee practised fraud making a wilful default in the payment of arrears of rent on account of which the property was put to sale and was ultimately purchased by the deceased mortgagee Luxminarayan for a sum of Rs. 300/- on 22-9-1936.
The sals was confirmed on 4-11-1936 and the purchaser Laxminarayan took possession through Court on 21-12-1938. The present suit for redemption has been filed on 14-11-1947 for redeeming the mortgage.
2. The defence is that even though the original plaintiff had executed the mortgage transaction (Ex. B) on 2-6-1928, possession was never delivered to the father of the defendants and the deceased plaintiff Priyanath remained in possession of the property. The mortgage dues under Ex. B were however discharged by payment of Rs. 1,860/- on 20-9-1929.
The father of the present defendants bona fide purchased the property in dispute in execution of a decree for rent on 22-9-1936 and there was no fraud or collusion as alleged by the plaintiff. Luxminarayan had never taken advantage of his position as a mortgagee which was extinct long ago. As the sale in execution of the rent decree is bona fide and a complete independent transaction, the plaintiff's suit for redemption is bound to fail.
3. It is to be observed here that apart from the usufructuary bond in suit dated 2-6-1928 (Ex. B) Priyanath had executed a transaction of mortgage by conditional sale in favour of defendant 1, the son of Luxminarayan, on 27-11-1929 (Ex. C) in respect of the self-same property covered by Ex. B for a consideration of Rs. 1,500/-. The transaction was, however, discharged by the execution of a simple mortgage on 23-5-1930 (Ex.) for a consideration of RS. 1,500 by Priyanath in favour of defendant 1. The rights and liabilities between the parties under Ex. D are not in dispute in the present case.
4. Both the Courts below have concurrently found that in fact possession was delivered to the mortgagee on the basis of Ex. B. They have further found that the plea of discharge taken by the defendants is not true. An attempt was made to impeach these concurrent findings of fact in the second appeal, but on a perusal of the judgments of the Courts below we are of the view that the findings had been arrived at after a thorough discussion of the materials on record and are simply unimpeachable in second appeal.
The trial Court on the above two findings came to the conclusion that the defendants had been in possession even after the purchase in execution of the decree for rent and were holding the property on behalf of the mortgagor and the right of redemption was still subsisting.
He had placed reliance on the terms of the, mortgage transaction itself to find that the mortgagee was under an obligation to pay the arrears of rent and made a wilful default. He therefore thought that the questions of fraud and collusion etc., were not material for the purpose of determining the real controversy in the case. The lower appellate Court, however, in an unnecessarily lengthy judgment discussed at length as to the questions of fraud and collusion, and finding that there was no fraud or collusion as alleged by the plaintiff dismissed the plaintiff's suit for redemption.
5. At the outset, it would be pertinent to refer to the terms of the usufructuary mortgage bond (Ex. B) on the question of payment of rent. Under the terms of the bond true, the initial responsibility of payment of rent is taken by the mortgagor, but nevertheless there is distinctly a clear and categorical clause following thereafter that if for any reason the mortgagor does not pay the arrears of rent for which the landlord brings a suit and attached the property and puts it to sale the mortgagee shall pay up the arrears to the landlord amicably and obtain receipt in acknowledgement of payment, or the mortgagee shall on behalf of the mortgagor deposit the arrears of rent in Court and release the property from attachment and sale.
Indeed, the present case is not covered by the provisions of Section 76(c), Transfer of Property Act which make it obligatory on the part of the mortgagee in possession to pay the Government revenue, or all other charges of a public nature, or arrears of rent in default of payment of which the property will be summarily sold, as the provisions are subject to the contract between the parties.
But the case is to be governed according to the terms embodied in the very mortgage transaction which imposes a heavy duty on the mortgagee to make payments of arrears of rent if the arrears are not paid by the mortgagor. It appears, therefore, clear that the sale was the result of a manifest dereliction of duty imposed upon the mortgagee by the very terms of the transaction. The clear position that follows therefore is that the mortgagee can never be allowed to take advantage of his own default on account of which the property was sold for arrears of rent.
On the above finding therefore that mortgagee Luxminarayan was in possession of the property since 1928 on the basis of the transaction in suit which was not discharged and further that the mortgagee-purchaser was guilty of a serious breach of duty imposed upon him by the terms of the mortgage on account of which -the property was put to sale the case is well covered by the principles underlying the provisions of Section 90, Illustration (c), Indian Trusts Act, 1882. Section 90 runs thus:
'Where a tenant for life, co-owner, mortgagee or other qualified owner of any property, by availing himself of his position as such, gains an advantage in derogation of the rights of other persons interested in the property or where any such owner, as representing all persons interested in such property, gains any advantage he must hold, for the benefit of all persons so interested, the advantage so gained, but subject to repayment by such persons of their due share of the expenses properly incurred, and to an indemnity by the same persons against liabilities properly contracted, in gaining such advantage.'
The present case is directly covered by Illustration (c) which is as follows :
'A mortgages land to B, who enters into possession. B allows the Government revenue to fall into arrear with a view to the land being put up for sale and his becoming himself the purchaser of it. The land is accordingly sold to B. Subject to the repayment of the amount due on the mortgage and of the expenses properly incurred as mortgagee, B holds the land for the benefit of A.'
6. The learned counsel, appearing on behalf of the mortgagee-respondents urges the first point that the recitals in the mortgage transaction do not amount to an obligation on the part of the mortgagee to make payment of arrears of rent but simply an embodiment of the rights conferred upon him by the provisions of Section 72(b), Transfer of Property Act, 1882.
Section 72 gives the mortgagee the right to spend such money as may be necessary for the preservation of the mortgaged property from destruction, forfeiture or sale, and may add such sum to the principal money at the rate of interest payable on the principal. On a fair reading of the document itself we are definitely of the view that the terms impose a heavy duty and obligation on the part of the mortgagee and are not merely enabling ones on account of the default of which the mortgagee is not to suffer.
The words 'shall pay arrears of rent to the landlord amicably or shall deposit in Court instead', in the absence of an enabling term like 'may' or 'has the right', are significant to lead to the view that it is really an obligation and not a right. Undoubtedly, the finding of the lower appellate Court is to the effect that he had not paid the arrears of rent to the mortgagee as alleged by the plaintiff. But this would not affect the rights of the plaintiff for redemption on the basis of the principles underlying the provisions of Section 90, Trusts Act.
7. A point has been urged by the learned counsel for the respondents that the dues for the recovery of which the decree was obtained were for the period prior to the execution of the mortgage transaction in suit of the year 1928, and as such, the mortgagee was under no obligation either in law or on the terms of the mortgage bond to pay up the dues which were in arrear prior to the execution of the transaction.
In our view, such a point cannot be raised as there is no material in support of the contention that the decree was for arrears of rent due prior to the execution of the mortgage transaction. In the trial Court, the parties contested the suit on the basis that the arrears were for a period after the execution of the mortgage transaction. The learned counsel for the respondents could not point out any material on record to show even the date of the decree far less that the decree was for the years 1925 to 1928 as contended by him on the observation in the judgment of the lower appellate Court.
The observation of the lower appellate Court seems to be wrong, not only that there was no material for this observation but manifestly also for the reasons that some part of that period must have been barred by limitation by the institution of the suit of the year 1931-32. The point is therefore to be rejected as being raised at a belated stage and as without any foundation.
8. The main point, however, urged by the learned counsel for the respondents is that the present suit is barred by limitation even though the plaintiff was entitled to invoke the principles underlying Section 90 of the Trusts Act. His contention is that on the rent sale on 22-9-1936, the plaintiff's right of redemption was extinguished and on the basis of the provisions of Section 90 of the Trusts Act, the plaintiff at best could be in the position of a cestui que trust.
His, first remedy is to enforce the trust by making a prayer for reconveyance of the equity of redemption which had passed on to the hands of the mortgagee on the rent sale and the mortgagee-purchaser holds the equity of redemption in trust for the plaintiff-beneficiary. A suit for redemption simpliciter will not lie and that a suit to enforce (rust will he governed by the residuary Article 120, Limitation Act, the period of limitation under which is 6 years from the date of cause of action, that is, the date of sale.
We are unable to accept this contention. On a plain reading of the provisions of Section 90, of the Trusts Act it appears clear that the right of redemption of the plaintiff-mortgagor was never extinguished by sale. It was still subsisting and that it was enforceable against the mortgagee who under law could never be entitled to take advantage of his own wrong by making a default in payment of the dues which he was under an obligation to pay.
The mortgage was continuing and the plaintiff's right to redeem had not been destroyed or extinguished. In the eye of law the purchase in the rent-sale must be deemed to have been made by the plaintiff himself. This view of ours gains support by reference to a decision of their Lordships of the Supreme Court reported in -- 'Sidhakamal Narayan Ramanuj Das v. Bira Naik', AIR 1954 SC 336 (A).
This judgment of the Supreme Court confirms the decision of our Court reported in -- 'Bira Naik, v. Mahant Sidhakamal', AIR 1951 Orissa 300 (B), where the principles involved are very similar to the present case. In that case the plaintiff executed a simple mortgage in favour of the defendant and the rent was payable by the plaintiff-mortgagor to the landlord. But the holding fell into arrears. Eventually a decree for arrears having been obtained the simple mortgagee paid up the arrears and obtained possession of the property under Section 225, Orissa Tenancy Act. The defendant's possession under the provisions of the said section was that of a mortgagee in possession.
Thereafter the holding again fell into arrears of rent and in execution of a decree for rent when the holding was sold the mortgagee purchased it himself. The plaintiff therefore brought the suit for redemption pure and simple. Their Lordships found that the mortgagee having obtained possession under Section 225, Orissa Tenancy Act was under a legal obligation to pay arrears of rent; and as he cannot be entitled to take advantage of his Own wrong, the plaintiff's right of redemption was still subsisting and the plaintiff was entitled to a decree for redemption. It will be pertinent to quote two passages from the judgment of their Lordships of the Supreme Court :
'The position, in our opinion, is very clear and in the absence of any special statutory provision to the contrary is governed by Section 90 of the Trusts Act. The defendant is a mortgagee and, apart from special statutes, the only way in which a mortgage can be terminated as between the parties to it is by the act of the parties themselves, by merger or by an order of the Court.
The maxim 'once a mortgage always a mortgage' applies. Therefore when the defendant entered upon possession he was there as a mortgagee and being a mortgagee the plaintiffs have a right to redeem unless there is either a contract between the parties or a merger or a special statute to debar them.'
In para 11 of the judgment their Lordships observed :
'When he purchased under the second sale he did not thereby destroy the plaintiffs right to redeem because he was at that time standing in the plaintiff's shoes as a mortgagee in possession under Section 225 (1) and his purchase so far as title was concerned had exactly the same effect as if the plaintiffs, having omitted to satisfy the decree and save themselves by all the last minute acts of grace permitted to judgment-debtors, had in the end, themselves purchased the property. All that happened was that he regained his position as a mortgagee in possession under Section 225 (1).'
It is to be observed here also that the suit was brought after the expiry of 6 years from the date of the purchase by the mortgagee in execution of the decree for rent and it was a simple suit for redemption. The above observations make the position absolutely clear that the right of redemption is still subsisting and is enforceable against the mortgagee.
9. We will further refer to a judgment of Jha C. J. and Reuben J. of the Patna High Court in the case of -- 'Ram Rup Singh v. Jang Bahadur, Singh', AIR 1951 Pat 566 (C), where the facts are very similar to the case before us. The plaintiff executed a usufructuary mortgage bond of his holding in favour of the defendant who entered into possession under it. It was agreed between the parties that the defendant would pay landlord's dues in respect of the holding.
He having failed to pay the amount of rent dues the property was sold in execution of the rent decree and purchased by the landlord himself. The defendant subsequently took settlement of the holding from the landlord. It was held by their Lordships in the suit for redemption brought by the plaintiff-mortgagor that the defendant was clearly in the wrong in allowing the property to be sold in execution of the decree for rent and by taking settlement of the holding from the landlord he could not take advantage of his own wrong in changing the character of his possession and deprive the plaintiff of his right of redemption,
It was not open to the defendant to contend that the plaintiff had lost his right of redemption, because the old tenancy had extinguished by the rent-sale. The plaintiff was entitled to treat the rent sale as against the defendant as a private sale and claim redemption even without a prayer for setting aside the sale.
10. Learned counsel for the respondents, however, strongly relies upon a Full Bench decision of the Calcutta High Court reported in --'Uttam Chandra Daw v. Rajkrishna Dalai', AIR 1920 Cal 363 (FB) (D). The question referred to the Full Bench was
'Where a mortgagee had, in contravention of Section 99, Transfer of Property Act, attached the mortgaged property and brought it to sale and purchased it himself, could the mortgagor or his transferee without first getting the sale set aside, successfully maintain a suit for redemption of the property?'
It would be pertinent to quote shortly the facts of the Full Bench case. The plaintiffs executed a usufructuary mortgage bond in favour of the defendant (Mr. U.C. Daw) who obtained possession on the basis of the mortgage transaction. On the same day the mortgagors executed a Kabuliyat in favour of the mortgagee whereby they attorned as tenants to him (Mr. Daw).
The mortgagors as tenants made default in payment of rent and the above mentioned defendant brought a suit for arrears of rent and eventually having obtained a decree purchased the property himself in execution of the decree for rent on the basis of the Kabuliyat executed on the date of the mortgage transaction. In the three judgments of Sanderson C. J., and Mookerjea and Chatterjea JJ. we find that they were of the view that the defendant did not bring the suit in his capacity as mortgagee but in his capacity as landlord.
This was a claim irrespective of the mortgage and therefore he would be in the same position as a 3rd party purchaser. On this view, in their Lordships' opinion the question referred to the Full Bench did not arise; but nevertheless even though the case could be disposed of on the above view they went on to the discussion of the question referred to them. Mr. Mitra, learned counsel for the present respondents before us, relies upon the following passages appearing in the judgment of Sanderson C. J., to support his contention.
'The suit is based upon the ground that the plaintiffs are the owners of the equity of redemption and are therefore entitled to redeem the, mortgaged property, whereas this argument is based upon the assumption that the property in the equity of redemption passed by the sale to the appellant U. C. Daw. If that be so, the plaintiffs had no interest in the property except as cestui que trust and they could not sue for redemption.
* * *' Upon the above mentioned assumption, the suit is really one to enforce a trust, and if it were treated as such it would be out of time, for Article 148, Limitation Act of 1908 would not apply, but Article 120 would apply.'
The main point for distinction in the Full Bench case from the present One is that the sale there was in contravention of the provisions of Section 99 of the former Transfer of Property Act corresponding to Order 34 Rule 4, Civil P. C. Their Lordships in each of the judgments made it absolutely clear that such a sale was not a nullity but only a voidable one and would stand unless and until it was set aside. There manifestly the argument was based upon the position that equity of redemption as a matter of fact had passed on to the purchaser defendant until the sale was set aside.
It was not a case where the mortgagee having taken advantage of his position as such was availing of the benefit of his own wrong as in the present one. Here the sale need not be set aside at all. We are simply to see what are the legal consequences of the sale. Even if the sale stands, the mortgagor's rights are not affected in the least. In our view, definitely the present case is fully covered by the decisions of their Lordships of the Supreme Court and of the Patna High Court referred to above. The point of limitation taken by the learned counsel for the respondents must therefore fail.
11. Indeed the lower appellate Court has found that there was no fraud or collusion to vitiate the rent sale as alleged by the plaintiff; but in our view for the above reasons the questions of fraud or collusion are absolutely immaterial and we should like to observe chat the lower appellate Court has gone completely wrong in devoting considerable part of his judgment on the questions of fraud or collusion having ignored the most pertinent point arising under the provisions of Section 90, Indian Trusts Act.
The trial Court, however, passed a decree for accounts on the finding that it was an anomalous mortgage and not a purely usufructuary one. We agree with the view taken by the trial Court, as it was not contested before us.
12. In conclusion, therefore, the appeal is allowed, the judgment and decree of the lower appellate Court are set aside and the judgment and decree of the trial Court are restored. The appellants are entitled to costs throughout.
13. I agree.