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Gyarsi Bai and ors. Vs. Dhansukh Lal and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtSupreme Court of India
Decided On
Judge
Reported inAIR1965SC1055; [1965]2SCR154
ActsTransfer of Property Act - Sections 76; Code of Civil Procedure (CPC),1908 - Order 2, Rule 2 - Order 21, Rule 2 - Order 34, Rules 4 and 8
AppellantGyarsi Bai and ors.
RespondentDhansukh Lal and ors.
Cases ReferredC.D. Sugar Co. v. C.N.Steamship A.I.R.
Excerpt:
.....whom the representation has been made. in theinstant case it may be said that the first two conditions are satisfied :theappellant represented to the respondents that he was liable to render accountsto them in regard to the net proceeds of the mortgaged properties from the dateof the plaint to the date of the preliminary decree, and on the said representationthe respondents agreed to the appellant drawing out from the court about rs......at the date of the preliminary decree. how can the amount due to themortgagee as on the date of preliminary decree be declared unless the netprofits realized by him from the mortgaged property are debited against him ?the statutory liability of the mortgagee to account upto the date of thepreliminary decree would be the subject-matter of dispute in the suit upto thedate of the said decree. the court has to ascertain the amount due under themortgage in terms of the mortgage deed and deduct the net realizations in themanner prescribed in section 76(h) of the transfer of property act andascertain the balance due to the mortgage on the date of the preliminarydecree. if the mortgagor did not raise the plea, he would be barred on theprinciple of res judicata from raising the same as.....
Judgment:

Subba Rao, J.

1. This appeal by special leave is directed against the judgment of aDivision Bench of the Rajasthan High Court in S.B. Civil Revision No. 181 of1956.

2. The plaint-schedule properties originally belonged to one Noor Mohammad,his wife and son. On September 14, 1936, they mortgaged the said propertieswith possession to B. F. Marfatia for a sum of Rs. 25,000. On February 22,1938, the said mortgagors executed a simple mortgage in respect of the sameproperties to one Novat Mal for Rs. 5,000. On December 21, 1942, Radha Kishan,Har Prasad and Pokhi Ram acquired the equity of redemption in the saidproperties in an auction sale held in execution of a money decree against themortgagors. On February 14, 1950, and March 13, 1950, Seth Girdhari Lal, thehusband of Appellant No. 1 herein, purchased the mortgagee rights of Novat Maland Marfatia respectively. On May 1, 1950. Girdhari Lal was put in possessionof the mortgaged properties. On July 22, 1950, Respondents 9 to 11 purchasedthe equity of redemption of the mortgaged properties from Radha Kishan. HarPrasad and Pokhi Ram. On August 10, 1950, Girdhari Lal instituted Civil suitNo. 739 of 1950 in the Court of the Senior Subordinate Judge, Ajmer, forenforcing the said two mortgages. In the suit he claimed Rs. 48,919-12-6 as theamount due to him under the said two mortgages. On April 25, 1953, the SeniorSubordinate Judge, Ajmer, gave a preliminary decree in the suit for therecovery of sum of Rs. 34,003-1-6 with proportionate costs and future interest;he disallowed interest from September 14, 1936, to March 13, 1950, on themortgage of Rs. 25,000. The plaintiff-mortgagee preferred an appeal, beingCivil Appeal No. 71 of 1953, to the judicial Commissioner, Ajmer, against thesaid decree in so far as it disallowed interest to him. The defendantspreferred cross-objections in respect of that part of the decree awarding costsagainst them. On July 25, 1953, the defendants filed an application underO.XXXIV, r. 5(1), of the Code of Civil Procedure, seeking permission to depositthe decretal amount in court and praying that possession of the properties maybe directed to be delivered to them and also for directing the decree-holder torender accounts of the profits of the mortgaged properties received by him. OnJuly 29, 1953, the respondents deposited Rs. 35,155-2-6 in the Trial Court. OnAugust 17, 1953, the decree-holder filed objections to the said deposit on theground that it was much less than the decretal amount. On August 27, 1953, theTrial Court made an order permitting the decree-holder to withdraw the saidamount with the reservation that the question as to what was due under thedecree would be decided later. On August 25, 1954, both the appeal of thedecree-holder and the cross-objections of the defendants were dismissed. OnDecember 7, 1954, the defendants filed an application in the Trial Court forthe determination of the amount due under the decree and for directing thedecree-holder to render accounts of all the realizations from the mortgagedproperties. On March 14, 1955, the Supreme Court granted special leave to thedecree-holder for preferring an appeal against the judgment of the JudicialCommissioner dismissing Civil Appeal No. 71 of 1953. On February 15, 1956, theTrial Court dismissed the application filed by the defendants for directions onthe ground that the mortgage deed had merged in the preliminary decree and thatthe said decree contained no directions to the plaintiff to render accounts. OnFebruary 29, 1956, the defendants applied to the Judicial Commissioner, Ajmer,under section 152 of the Code of Civil Procedure for amending the preliminarydecree by including therein a direction against the plaintiff for rendition ofaccount in respect of the profits received by him from the mortgagedproperties. On April 12, 1956, the Judicial Commissioner dismissed the saidapplication. On April 25, 1956, the defendants filed a revision petitionagainst the order of the Trial Court dated February 15, 1956, in the Court ofthe Judicial Commissioner, Ajmer. As by that time the Supreme Court had givenspecial leave to appeal against the decree of the Appellate Court confirmingthe preliminary decree, the Judicial Commissioner, on August 1, 1956, made anorder adjourning the hearing of the revision petition till after the decisionof the Supreme Court in Civil Appeal No. 383 of 1956. On February 17, 1957, thedecree-holder died, and his legal representatives, who are the appellantsherein, were brought on record. On December 16, 1960, this Court deliveredjudgment in the said appeal modifying the preliminary decree made in the suitand directing the Trial Court to pass a fresh final decree. On April 5, 1961,the High Court accepted the revision petition filed by the defendants, remandedthe case to the Trial Court and directed it to take an account of the receiptsfrom the mortgaged properties and expenses properly incurred for the managementetc. of the said properties as contemplated under section 76(g) and (h) of theTransfer of Property Act and to determine what sum remained to be paid to themortgagees taking into account the decision of this Court. Hence the presentappeal.

3. The gist of the arguments of Mr. B. D. Sharma, learned counsel for theappellants may be stated thus : (i) A preliminary decree settles the rights ofparties by deciding all the controversies between them relating to a mortgagetransaction and gives all necessary directions for carrying into effect thoserights, while a final decree concerns itself with the working out of thoserights; further, the mortgage merges into the preliminary decree and thereafterno relief can be given on the terms of the mortgage; on the basis of the saidtwo principles it must be held that, as the preliminary decree in the presentcase did not give a direction to the mortgagee for rendition of an account ofthe profits of the mortgaged properties, the Court has no jurisdiction todirect such a rendition of accounts on an application filed by the mortgagorsafter the preliminary decree was made. (2) The High Court went wrong in holdingthat the appellants were estopped from raising the plea that the mortgagee wasnot liable to render accounts for the period between the data of the filling ofthe plaint and that of the preliminary decree. And (3) the High Court shouldhave taken into consideration the equities in favour of the mortgagee.

4. The arguments of Mr. A. Viswanatha Sastri, learned counsel for therespondents, may be summarized thus : The relationship of mortgagor andmortgagee continues upto the date of the final decree. The statutory liabilityof a mortgagee to account for the profits received by him and credit the sametowards the mortgage debt also subsists till that date and, therefore, the factthat the amounts realized by the mortgagee were not given credit to inascertaining the amount due to him under the mortgage at the time of the makingof the preliminary decree would not relieve the mortgagee of his liability toaccount for the same. It is further contended that though the rents realizedcould have been taken into account at the time the preliminary decree was made,the mortgagee was not bound to appropriate the amount towards the debt beforethe preliminary decree, for he could do so after the decree though the amountswere realized before the decree. In any view, it is contended, as the mortgageedid not deny his liability to account for the profits realized by him from themortgaged properties before the preliminary decree was made, he could not evadehis statutory liability to account for the profits realized and to appropriatethe same towards the mortgaged debt till the relation ship of mortgagor andmortgagee came to an end.

5. The main question in the appeal is whether the preliminary decree passedin the suit debars the mortgagors from claiming that the mortgagee has toaccount for the profits realized by him from the mortgaged properties in hispossession; if he is not so debarred, what is the period for which themortgagee could be compelled to render accounts in respect of the said profits? The suit was filed on August 10, 1950; the preliminary decree was made underO. XXXIV, r. 4, of the Code of Civil Procedure on April 25, 1953. Thepreliminary decree does not contain direction directing the mortgagee toaccount for the profits realized from the mortgaged properties in hispossession. The contention briefly stated is that, as there is no direction inthe preliminary decree, the mortgagee escapes his statutory liability to renderaccounts under section 76 of the Transfer of Property Act. To appreciate thiscontention the relevant provisions of the Code of Civil Procedure and those ofthe Transfer of Property Act may be considered. Under O. XXXIV, r. 4, of theCode of Civil Procedure, in a suit for sale, if the plaintiff succeeds, theCourt shall pass a preliminary decree to the effect mentioned in cls. (a), (b)and (c) (i) of sub-r. (1) of r. 2; under r. 2, in a suit for foreclosure, ifthe plaintiff succeeds, the Court shall pass a preliminary decree ordering thatan account be taken off what is due to the plaintiff at the date of such decreefor (i) principal and interest on the mortgage. From No. 5 of Appendix D to theFirst Schedule to the Code prescribed the form for directing the accounts to betaken and From No. 5A thereof provides for a decree which by itself declaresthe amount due to the plaintiff on the mortgage. Section 76(h) of the Transferof Property Act says :

'When, during the continuance of the mortgage, themortgagee takes possession of the mortgaged property, his receipts from themortgaged property, or, where such property is personally occupied by him, afair occupation-rent in respect thereof, shall, after deducting the expensesproperly incurred for the management of the property and the collection ofrents and profits and the other expenses mentioned in clauses (c) and (d), andinterest thereon, be debited against him in reduction of the amount, if any,from time to time due to him on account of interest and, so far as suchreceipts exceed any interest due, in reduction or discharge of themortgage-money; the surplus, if any, shall be paid to the mortgagor.'.

6. The gist of the said provisions may be stated thus : In a suit on amortgage for sale the Court may order an account to be taken of what is due tothe plaintiff at the date of the preliminary decree and in that case the decreewill be made in Form No. 5 in Appendix D to the First Schedule to the Code; orit may declare the amount so due on that date, in which case a decree will bemade in Form No. 5A in the said Appendix. In a case where a decree is made inForm No. 5A, it is the duty of the Court to ascertain the amount due to themortgagee at the date of the preliminary decree. How can the amount due to themortgagee as on the date of preliminary decree be declared unless the netprofits realized by him from the mortgaged property are debited against him ?The statutory liability of the mortgagee to account upto the date of thepreliminary decree would be the subject-matter of dispute in the suit upto thedate of the said decree. The Court has to ascertain the amount due under themortgage in terms of the mortgage deed and deduct the net realizations in themanner prescribed in section 76(h) of the Transfer of Property Act andascertain the balance due to the mortgage on the date of the preliminarydecree. If the mortgagor did not raise the plea, he would be barred on theprinciple of res judicata from raising the same as the said matter should bedeemed to have been a matter which was directly and substantially in issue inthe suit up to that stage. It is settled law that though a mortgage suit wouldbe pending till a final decree was made, the matters decided or ought to havebeen decided by the preliminary decree were final. Suppose the mortgagor paidcertain amounts to the mortgagee before the preliminary decree; if these werenot given credit to the mortgagor and a larger amount was declared by thepreliminary decree as due to the mortgagee, can the mortgagor, afterpreliminary decree, reopen the question Decidedly he cannot. This is becausethe preliminary decree had become final in respect of the disputes that shouldhave been raised before the preliminary decree was made. So too, under section76(h) of the Transfer of Property Act, the net receipts of the mortgagedproperty have to be statutorily debited against the mortgagee in deduction ofthe amount due under the mortgage from time to time in the manner prescribedthereunder. The principle underlying the said clause is that the usufruct ofthe mortgaged property represents the mortgagor's money. On the same analogy ofvoluntary payment, if a preliminary decree, by a wrong decision or by reason ofan omission of the requisite plea, ignored the net realization in ascertainingthe amount due to the mortgagee, it must be held that the Court refused to givecredit to the said receipts. We therefore, hold that in the present case so faras the amounts statutorily debited to the mortgagee under section 76(h) of theTransfer of Property Act before the date of the preliminary decree areconcerned, they could not be taken into account as the Court did not take thoseamounts into consideration at the time it made the said decree.

7. But the same cannot be said of the net receipts realized by mortgageesubsequent to the preliminary decree. None of the principles relied upon thelearned counsel for the appellants helps him in this regard. It is true that apreliminary decree is final in respect of the matters to be decided before itis made : see Venkata Reddy v. Pethi Reddy [1963] Supp. 2 S.C.R. 616., andsection 97 of the Code of Civil Procedure. It is indisputable that in amortgage suit there will be two decrees, namely, preliminary decree and finaldecree, and that ordinarily the preliminary decree settles the rights of theparties and the final decree works out those rights : see Talebali v. AbdulAzia [1930] I.L.R. 57 Cal. 1013., and Kausalya v. Kauleshwar [1945] I.L.R. 25 Pat. 305.. It cannot also be disputed that mortgage merges in thepreliminary decree and the rights of parties are thereafter governed by thesaid decree : see Kusum Kumari v. Debi Prosad Dhandhania ([1935] L.R. 63 I.A.114.). But we do not see any relevancy of the said principles to the problemthat arises in this case in regard to the liability of the mortgagee to accountfor the net receipts under section 76(h) of the Transfer of Property Act. Apreliminary decree is only concerned with disputes germane to the suit upto thedate of the passing of the said decree. The net receipts of the mortgaged propertyby the mortgagee subsequent to the preliminary decree are outside the scope ofthe preliminary decree : they are analogous to amounts paid to a mortgagee by amortgagor subsequent to the preliminary decree.

8. Realizing this difficulty, Mr. Sharma contended that it must be held thatthe question of statutory liability of the mortgagee to account for thereceipts must be deemed to have been decided in favour of the mortgagee by thepreliminary decree. It is true that the mortgagee may, if he chose, have raisedthis untenable contention that for some reason he was not under a statutoryliability to account for receipts under section 76 of the Transfer of PropertyAct; and if the Court wrongly decided in his favour, the finding might havebeen binding on the mortgagor in respect of the mortgagee's liability toaccount for receipts even for the subsequent period subsequent to thepreliminary decree was neither expressly. He had conceded his general statutoryliability, but, by some mistake, it was not quantified upto the date of thepreliminary decree and deducted from the mortgage amount. His liability for theperiod subsequent to the preliminary decree was neither expressly nor impliedlynegatived by the preliminary decree. In this context, the decision of theJudicial Committee in Madan Theatres, Ltd. v. Dinshaw & Co. Ltd. , may usefully be cited. There, the question arosewhether after the preliminary decree there could be an adjustment of the suitwithin the meaning of O.XXIII, r. 3, of the Code of Civil Procedure. TheJudicial Committee observed :

'A decree holder need not,of course, agree to any adjustment or accept payment otherwise than into court,but in their Lordships' opinion it is open to the debtor to allege and provethat an adjustment has taken place or payment in whole or in part has been madeand received. ....... Admittedly the suit continues until the final decree ispassed, and there is no time limit for recording the agreement arrived at asthere is under Or. 21, r. 2.

As a suit, notwithstanding thepreliminary decree, continued till the passing of the final decree any paymentmade by the judgment debtor to the decree-holder after the preliminary decreewould go in deduction of his mortgage liability. On the same analogy, the netreceipts statutorily debited to the mortgagee would equally be taken intoconsideration in fixing the mortgagor's ultimate liability. This question wasconsidered by Clark, J., in Satyanarayana v. Suryanarayana A.I.R. 1949 Mad. 613. There, the appellant mortgaged certain property to the respondent'sfather, who went into possession of the same. In the usual course a preliminarydecree was made in favour of the mortgagee. After the preliminary decree themortgagor filed an application for an account to be taken of the profitsreceived by the mortgagee after the date of the preliminary decree and beforethe passing of the final decree. It was contended that in the absence of anyprovision in the preliminary decree for taking of any account, no such accountcould be ordered. Rejecting that contention, the learned Judge observed :

'That he (the mortgagor) isso entitled is well-settled law. A mortgage suit continued until the finaldecree is passed and the relationship of a mortgagor and mortgagee continuesuntil then. Accordingly a mortgagee in possession has until the expiry of thatperiod the liabilities imposed on him by section 76, T.P. Act. It is true thatO. 34, r. 8 does not in terms provide that a mortgagor in a suit for redemptionapplying for a final decree is entitled to have an account taken of the profitsreceived by the mortgagee in possession between the date of the preliminarydecree and the date when possession is given; but the provisions of O. 34 readas a whole clearly indicate that such an account must necessarily be taken.Even if they did not, the right of the mortgagor to such an account isestablished beyond question by the provisions of section 76, T.P. Act. Again itis beyond question that when a suit whether for sale or redemption of amortgage is filed it is the duty of the Court to decide in that suit all theclaims of the mortgagor and mortgagee under the mortgage up to the date whenthe final decree is given. Such claims can and indeed must be included in themortgage suit. If they are not included the person failing to include them isbarred thereafter under the provisions of O. 2, R. 2, Civil P.C. from filing asuit in respect of them.'

9. The learned Judge cited a number of decisions in support of hisconclusion. These observations appear to be rather wide and comprehensiveenough to take in the liability of a mortgagee to account for the net receiptsfrom the mortgaged property even for the period before the preliminary decree.But the facts of that case show that the learned Judge was only considering thequestion of the mortgagee's liability for a period after the preliminary decreewas made, even though the preliminary decree did not contain a direction thatthe mortgagee had to account for the said receipts. We agree with theseobservations with the limitation mentioned above. We, therefore, hold that asregards the net receipts from the mortgaged properties subsequent to the makingof the preliminary decree the Court was right in giving credit for them to themortgagor in fixing his liability.

10. Mr. Viswanatha Sastri next argued that the mortgagee is debarred by thedoctrine of estoppel from denying his liability to account for the net receiptsfrom the mortgaged properties for the period between the date of the plaint andthe date of the preliminary decree. The plea of estoppel is based upon thefollowing facts : On July 25, 1953, the respondents filed an application in theCourt of the Senior Subordinate Judge, Ajmer, wherein they mentioned that underthe preliminary decree the amount due was Rs. 958-4-0, that the amount realizedby the appellants as rent from the tenants up to the date of the saidapplication was Rs. 4,250, that the costs awarded by the Court against themagainst which they were going up in appeal was Rs. 2,553-1-6 and the balancepayable to the appellants after deducting the said amount was Rs. 35,155-2-6.The prayer in the petition was that the appellants be directed to deliverpossession of the said properties to them and also be called upon to rendertrue and correct account of the recoveries made by the mortgagee as rent fromthe date of suit to the date of his handing over possession of the saidproperties. To that petition the mortgagee filed a counter-affidavit wherein headmitted that he had realized only Rs. 4,488-2-0 towards rent from August 10,1950, to July 28, 1953, and that he had incurred an expenditure of Rs. 1,897 inconnection with the management of the said properties during the said periodand that the respondents should have deposited Rs. 30,515-10-0 in the Courtaccording to the 'present' decree. The sum of Rs. 39,515-10-0 wasarrived at by adding the net receipts of rents from August 10, 1950, to July28, 1953, to the amount sought to be deposited by the respondents in Court. Itis, therefore, clear that the mortgagee admitted that he had to account to therespondents for the receipts of the mortgaged properties. After depositing Rs.35,515-2-6, the respondents filed on December 7, 1954, an application in theCourt of the Subordinate Judge stating that they were prepared to deposit allthe remaining amounts which would on settlement of accounts, be found dulypayable to the mortgagee. They also prayed that the mortgagee be directed toproduce the accounts of all the rents and profits which he had realized so thatthe Court, after checking the aforesaid accounts, might decide what amount wasexactly due to the mortgagee. To that application the mortgagee filed acounter-affidavit, wherein he stated thus :

'That the plaintiff has no objection to give anaccount as to the amounts of rent realised by him and the expenses incurred byhim in the management and preservation of the mortgaged property but hemaintains that he has a right to remain in possession of the property and enjoyits usufruct till the last penny due on the mortgage in his favour is paid upto him. The plaintiff is therefore entitled to remain in possession of theproperty till the amount of Rs. 14,916-11-0 on account of interest wronglydisallowed by the learned Court is also paid to him alongwith the other dues ortill the said interest is finally disallowed by Honourable the Supreme Court ofIndia in appeal.'

11. It will be seen again that the mortgagee in clear terms admitted hisliability to account for the net receipts from the mortgaged properties; but heclaimed that he would be entitled to be in possession till the interest amountdue was also paid to him. On August 27, 1953, the Senior Subordinate Judgeordered that the amount deposited by the mortgagors less the amount attached bythe Income-Tax Officer may be paid to the mortgagee. As by that time the appealand the cross-objections filed by the mortgagee and the respondentsrespectively were not disposed of, the learned Subordinate Judge left open thequestion as to the amount that would actually be due to the mortgagee tillafter they were disposed of. It appears that the said amounts were drawn out bythe mortgagee. From the aforesaid documents it is clear that the respondentsdeposited Rs. 35,515-2-6 in the Court after taking the net proceeds alleged tohave been realized by the mortgagee from the mortgaged properties and prayedthat the mortgagee should be directed to render true and correct accounts fromthe date of the suit to the date of his handing over possession of the said propertiesto the respondents. The mortgagee admitted his liability to account for thereceipt and only claimed that he was entitled to be in possession of theproperties till the interest disallowed by the Court was paid to him. From thesaid facts it is argued that the respondents would not have permitted themortgagee to draw out the amount if he had not admitted his liability toaccount for the net receipts from the mortgaged properties and that themortgagee having drawn that amount subject to the liability, he is now estoppedfrom denying his liability. Under section 115 of the Evidence Act when oneperson by his declaration, act or omission intentionally caused another personto believe a thing to be true and to act upon such belief, he cannot deny the truthof the thing. The doctrine of estoppel embodied in section 115 of the EvidenceAct has been explained by the Judicial Committee in C.D. Sugar Co. v. C.N.Steamship A.I.R. 1947 P.C. 40. in the following terms :

'estoppel is a complex legal notion, involving acombination of several essential elements, the statement to be acted upon,action on the faith of it, resulting detriment to the actor.'

12. To invoke the doctrine of estoppel three conditions must be satisfied :(1) representation by a person to another, (2) the other shall have acted uponthe said representation, and (3) such action shall have been detrimental to theinterests of the person to whom the representation has been made. In theinstant case it may be said that the first two conditions are satisfied : theappellant represented to the respondents that he was liable to render accountsto them in regard to the net proceeds of the mortgaged properties from the dateof the plaint to the date of the preliminary decree, and on the said representationthe respondents agreed to the appellant drawing out from the Court about Rs.35,515 deposited by them. But can it be said that the respondents had in anyway acted to their detriment on the basis of the representation made by theappellant The respondents had to pay the decretal amount to the appellant ifthey wanted to get possession of the properties. What they paid was less thanwhat they had to pay under the decree. By paying the said amount they didnothing more than discharging their liability under the decree. The dischargeby the respondents of their legal liability under the decree cannot in anysense of the term be described as detrimental to them. Whether therepresentation was made or not they had to pay that amount and by paying thatamount they had secured a benefit in as much as from the date of payment theinterest on that amount ceased to run. There is no scope, therefore, in thiscase to invoke the doctrine of estoppel. We, therefore, hold that the order ofthe Rajasthan High Court was correct, except in regard to the direction givenby it to the Subordinate Judge to take into account all the receipts of themortgaged properties from August 10, 1950, to July 25, 1953. The order of theHigh Court is accordingly modified. The parties will pay and receiveproportionate costs here and in the High Court.

13. Order modified.


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