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Peerukannu Shahul Hameed and ors. Vs. Osanaru Pillai Ahammed Kannu and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKerala High Court
Decided On
Case NumberSecond Appeal No. 363 of 1963
Judge
Reported inAIR1970Ker81
ActsTransfer of Property Act, 1882 - Sections 58, 60 and 91; Limitation Act, 1908 - Sections 28 and 29 - Schedule - Articles 119, 132, 136 and 148
AppellantPeerukannu Shahul Hameed and ors.
RespondentOsanaru Pillai Ahammed Kannu and ors.
Appellant Advocate P. Subramanian Potti,; S.A. Nagendran,; P.A. Mohammed
Respondent Advocate G. Vishwanatha Iyer and; S. Bhagavathilekshi Ammal, Advs.
DispositionAppeal dismissed
Cases ReferredGeorge v. Raghava Menon
Excerpt:
(i) property - mortgage by conditional sale - sections 28 and 29 and articles 119, 132, 136 and 148 of schedule to limitation act, 1908 and sections 58, 60 and 91 of transfer of property act, 1882 - whether appellants be allowed to redeem earlier mortgage on ground that it was a mortgage by conditional sale and it had worked itself as out as a sale - transaction after 1882 be treated mortgage by conditional sale only if it satisfy conditions under section 58 (c) - held, not a mortgage by conditional sale and condition for mortgage working itself out as a sale is a clog on right of redemption and invalid. (ii) mortgage - whether appellants be allowed to redeem mortgages treating them as pure mortgage without possession - whether limitation to apply - right of redemption given to puisne.....narayana pillai, j.1. the suit filed on the strength of ext. f, a hypothecation bond dated 12-3-1923, for redemption of 2 earlier mortgages dated 29-4-1909 and 11-2-1910 of the same properties and copies of which are exts. xi and xii, was dismissed by both the lower courts and it is from these decrees that the present second appeal has been filed by the plaintiffs.2. the transactions took place in the erstwhile travancore state. under article 119 of the travancore limitation act, 6 of 1100 (m. e.), the appellants had 12 years' time to recover through suit the money due under ext. f. that was not availed of by them. according to the learned advocate general who appeared for them ext. f was a mortgage by conditional sale, ft had worked itself out as a sale and therefore they as owners of.....
Judgment:

Narayana Pillai, J.

1. The suit filed on the strength of Ext. F, a hypothecation bond dated 12-3-1923, for redemption of 2 earlier mortgages dated 29-4-1909 and 11-2-1910 of the same properties and copies of which are Exts. XI and XII, was dismissed by both the lower Courts and it is from these decrees that the present Second Appeal has been filed by the plaintiffs.

2. The transactions took place in the erstwhile Travancore State. Under Article 119 of the Travancore Limitation Act, 6 of 1100 (M. E.), the appellants had 12 years' time to recover through suit the money due under Ext. F. That was not availed of by them. According to the learned Advocate General who appeared for them Ext. F was a mortgage by conditional sale, ft had worked itself out as a sale and therefore they as owners of the properties had a right to redeem the earlier mortgages even though the right to claim the amount due under Ext. F had become barred by limitation. He argued that even if Ext. F had become barred under the Limitation Act that bar related only to recovery of money due under Ext. F and not to the other rights including the right of redemption of the earlier mortgages that the appellants had under Ext. F, that the right of redemption could be lost only after the expiry of the period provided for redemption in the Limitation Act, that that period not having elapsed on the date of suit they were competent In the present suit to redeem the earlier mortgages for that reason also and that the suit was not barred by limitation. These in brief were the points pressed by him when this appeal was heard.

3. We must now deal with the question whether the appellants can be allowed to redeem the earlier mortgages on the ground that Ext. F was a mortgage by conditional sale and that it had worked itself out as a sale. The document is styled as a ''Sthreedhana Eedadharam'. It was executed for 14,000 Fanams by-one Meeran Pillai in favour of his daughter Fathummal and her husband Peerukannu. The consideration for the document was the Stridhanam amount agreed to be paid by Meeran Pillai to Pathummal and Peerukannu at the time of their marriage. It is stated in the document that it was being executed as Meeran Pillai was not in a position to pay the amount ready cash. He agreed to pay the hypothecation amount within a year. If it was not paid within that time he further agreed that Pathummal may enjoy the properties as full owner. According to the learned Advocate General as Meeran Pillai did not pay the hypothecation amount within the time stipulated in Ext. F the transaction had become a sale of the properties.

4. The Transfer of Property Act, for short the T. P. Act, had no statutory force in the erstwhile Travancore State. Nevertheless, the courts there were freely following many of the principles laid down in that Act. In this connection the following observations in Velandy Vadhiar v. Sankarapandian Mudaliar, 1943 Trav-Co. LR 425 of Sankarasubba Iyer, J. who was for long a Judge of the High Court there and who had wide experience with regard to the conditions prevalent and the state of the law there are entitled to great weight:

'It cannot be said that the prevailing view in a neighbouring Presidency will not have affected the people of the State in so far as their legal relations are concerned, The Transfer of Property Act became law in British India in 1882. This Court has been accepting the provisions of the Act and acting upon them, when they are in accordance with justice and equity, even though the enactment is of no statutory force in the State. It is therefore probable that mortgages in Travancore, executed at least after 1882, when the Transfer of Property Act became statute law in British India, might have been executed in accordance with the principles contained there rather than on the basis of an archaic rule embodied in the Hindu Smritis.'

The conditions laid down in Section 58(c) of the T. P. Act which defines a mortgage by conditional sale were applied to the transaction in dispute in 1943 Trav-Co. LR 425 to find out whether it was really a mortgage by conditional sale. In Padmanabha Pillai v. Umamaheswara Iyer, 1948 Trav-Co. LR 556 also the Travancore High Court freely followed the principles in the T. P. Act for construing the documents which came up for interpretation there to find put whether they were mortgages by conditional sale. From all these it has to be taken that even in the erstwhile Travancore State a transaction after 1882 could be treated a mortgage by conditional sale only if it satisfied the conditions laid down in Section 58(c) of the T. P. Act

5. Section 58(c) read thus:--

'Where the mortgagor ostensibly sells the mortgaged property --

on condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute, or on condition that on such payment being made the sale shall become void, or

on condition that on such payment being made the buyer shall transfer the property to the seller.

the transaction is called a mortgage by conditional sale and the mortgagee a mortgagee by conditional sale: Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale.'

It shows that in order that a transaction can be treated as a mortgage by conditional sale it should, to begin with, have the resemblance of a sale. That is implied in the expression 'ostensibly sells' at the beginning of the definition, Where the transaction has, to start with, the appearance of only a mortgage it cannot come under Section 58(c). In such, a transaction provision to treat it as a sale if the mortgage amount is not paid within a stipulated period is a clog on the right of redemption and cannot be given effect to. No doubt the provision to treat the transaction as a sale in a mortgage document is also an agreement between the parties. But is there consideration for it in order to treat it also as a valid contract? It is a special agreement in the contract of mortgage. Let me take Ext. F in the instant case. The consideration for the mortgage was 14,000 Fns. It got itself exhausted by the contract of mortgage. The special agreement to treat the transaction as a sale if the mortgage amount was not paid within a particular time was really outside the contract of mortgage. Time of payment is not of the essence of a mortgage transaction. Consequently non-payment of the mortgage amount within the period stipulated in the mortgage document cannot be deemed a detriment furnishing the consideration for the special agreement to treat the transaction as a sale of the mortgaged property. Really there was no consideration for that special agreement.

6. Without attempting to survey all the cases dealing with the subject of mortgage by conditional sale the following may be referred to now as being representative:

(1) In 1943 Trav-Co. LR 425 one of the questions which had to be considered was whether Ext. A in that case was a mortgage by conditional sale. It was a hypothecation bond which provided for payment of the principal amount and interest before a particular date. If the money due under it was not paid within the stipulated period the transaction was directed to be treated as a sale of the property covered by the hypothecation bond. It was held by a Full Bench that the document could not be treated as a mortgage by conditional sale.

(2) 1948 Trav-co. LR 556 is also a decision of a Full Bench. There it was interpretation of certain mortgage transactions with possession that arose for consideration. In them also there were provisions for treating them as sales if the mortgage amounts were not paid within the periods prescribed. They were not treated as mortgages by conditional sale.

(3) In Mathen v. Kottayam Bank Ltd., 1956 Ker LT 63, the document that came up for interpretation was styled as a 'Sthreedhanam udampady.' It was provided in it that if the amount mentioned in it was not paid within 2 years the property covered by it was to be enjoyed by the person in whose favour it was executed with full proprietary rights. The amount was not paid within the stipulated period. It was held that the document was only a mortgage with possession.

(4) In Mrs R. F. Gomez v. P. V. Chellammal, 1957 Ker LT 495, with regard to the stipulation in a mortgage deed that If the mortgage was not redeemed within a certain period the transaction had to be treated as a sale it was held that it was a clog on redemption and was invalid.

(5) In Mehrban Khan v. Makhana, AIR 1930 PC 142 it was the interpretation of a mortgage deed that provided for the mortgagees becoming owners of the mortgaged properties if the mortgage was not redeemed within 19 years that came up for interpretation. The mortgage was not redeemed within that time. The case arose from a decision of the Judicial Commissioner in the erstwhile North West Frontier Province where the T. P. Act had no statutory force. It was held that that matter had to be decided by equity and good conscience and that that meant that the rules of English law applied. Applying those rules it was held by the Privy Council that the provision in the document stipulating the mortgagees becoming owners of the mortgaged property if the mortgage was not redeemed within the prescribed period was a clog upon the equity of redemption and that consequently it was void.

(6) In Thumbuswamy Moodelly v. Hossain Rawthen, (1876-78) ILR 1 Mad 1 (PC) a mortgage deed provided for the income from the mortgaged properties being utilised for payment of Government revenue and similar other things by the mortgagee and thereafter the balance being utilised by him for the liquidation of the mortgage debt. It also provided that after the period prescribed in the document if on settlement of accounts it was found that money was still due to the mortgagee he was to become the purchaser at a fixed value of so much of the land as would satisfy such balance. The Privy Council construed it as a mortgage. It was observed in that case that the distinction between a sale with a condition for repurchase and mortgage by conditional sale was dependent upon the intention of the parties and that such intention could be proved by oral evidence.

(7) In Sheoram Singh v. Babu Singh, AIR 1926 All 493 a mortgage deed which provided for that document being treated as a sale deed if the mortgage amount was not paid within the time stipulated was construed as a mortgage by conditional sale.

7. Except in the last mentioned case in all the other cases referred to above a transaction which originated as a mortgage was not treated as a mortgage by conditional sale. In (1876-77) ILR 1 Mad 1 (PC) it was observed that allowing the parties to adduce oral evidence to prove their intention to ascertain whether a transaction was a mortgage by conditional sale would open a wide field of litigation. It was also observed that the state of the law as it stood was unsatisfactory and that it called for the interposition of the Legislature. It was a few years thereafter that the T. P. Act was passed. One of the decisions followed in AIR 1926 All 493 was (1876-77) ILR 1 Mad 1 (PC). With great respect to the learned Judges who decided AIR 1926 All 493 it has to be stated that due importance does not appear to have been given by them in that decision to the principle that a transaction can be treated as a mortgage by conditional sale only If, to begin with, it was ostensibly a sale.

I respectfully disagree with that decision and agree with the other decisions referred to above. On an examination of the provisions of Ext. F in the light of the principles and the decisions discussed above I hold that Ext. F is not a mortgage by conditional sale and that the condition in it for the mortgage working itself out as a sale is a clog on the right' of redemption and as such invalid.

8. I turn now to the question whether the appellants can be allowed to redeem the mortgages, Exts. XI and XII, treating Ext. F as a pure mortgage without possession. Article 119 of the Travancore Limitation Act, corresponding to Article 132 of the Indian Limitation Act, 9 of 1908, provided for 12 years from the date the money became due for institution of suits for recovery of money due charged on property. The right to recover the money due under Ext. F. had become barred by limitation long before the institution of the present suit. Article 136 of the Travancore Limitation Act fixed a period of 60 years for redemption of mortgages. The corresponding provision in the Indian Act, 9 of 1908, is Article 148 which provided a period of 60 years for institution of suits for redemption of mortgages. Section 29 of the Travancore Limitation Act corresponding to Section 28 of the Indian Limitation Act, 9 of 1908. provided that at the determination of the period mentioned in the Articles for a person for institution of a suit for recovery of possession of property his right to such property would get extinguished. It was agreed by learned counsel appearing for both sides when this appeal was heard that the right to redeem the prior mortgages, Exts. XI and XII, had not become barred by limitation on the date of suit. For convenience reference is being made hereafter only to the provisions of the Indian Limitation Act and wherever the words 'Limitation Act' are mentioned they are with reference to the Indian Act, 9 of 1908. We shall now read Section 28 and Articles 132 and 148 of the Limitation Act:

'Section 28. At the determination of the period hereby limited to any person for instituting a suit for possession of any property, his right to such property shall be extinguished.'

9. According to the learned Advocate General besides the right to recover the money due under Ext. F the appellants being puisne mortgagees had also a right under Section 91 of the Transfer of Property Act to redeem the prior mortgages and the latter right had not become barred by limitation on the date of suit.

Even as regards the former right for recovery of the money due under Ext. F only the right to recover it through suit had become barred on the date when the present suit was filed. There is nothing in the Limitation Act to indicate that on the expiry of the period fixed in it for enforcement through suit of the right to recover money charged on property that right is lost to the mortgagee for being used in other manners also. Section 28 of the Limitation Act which provides for extinction of rights in property applies only to omission to institute within the prescribed period suits for possession of property and not to suits for recovery of money charged on property. If a mortgagee is in possession of property and money is due to him on other accounts charged on that property he can recover all those amounts on settlement of accounts at the time of redemption. That is an instance to show that although a suit to recover the money charged on property may be barred under Article 132 of the Limitation Act it could still be recovered if the person entitled to it was in- possession of that property. That indicates that even if the right to recover the money charged on property is barred under Article 132 the charge-holder has still an interest in the property and any interest in the property is sufficient to entitle him to claim redemption of prior mortgages under Section 91(a) of the Transfer of Property Act, which reads as follows:--

'Besides the mortgagor, any of the following persons may redeem, or institute a suit for redemption of, the mortgaged property, namely:-- (a) any person (other than the mortgagee of the interest sought to be redeemed) who has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same;'

In the present case on the date of suit the period prescribed for redemption of the prior mortgages had not become barred by limitation. Therefore the suit by the appellants on the strength of Ext. F for redemption of the prior mortgages was competent and had not become barred by limitation. So goes the interesting and apparently logical argument of the learned Advocate General.

10. I shall now examine the decisions cited by him in support of the position he has taken. Jokhu Bhunja v. Sitla Baksh Smgh, AIR 1930 All 410; Varaha Devaswom v. Ummer Sait, AIR 1951 Trav-Co. 17; and P. Neelakantan v. Umminnui Pillai 1952 Ker LT 129 = AIR 1952 Trav-Co. 295 are cases in which on settlement of accounts at the time of the redemption mortgagees were directed to be paid not merely the money due under the mortgages which were sought to be redeemed but also time-barred debts charged on the mortgaged property.

In other words, the time-barred debts charged on the mortgaged property were allowed to be tacked on to the mortgage amount at the time of redemption of the mortgage. In all those decisions it was while the mortgagee was in possession oil the mortgaged property that the debt due to him charged on the property became barred by limitation. In In Re Hepburn: Ex Parte, Smith, 1884-14 QB 394 Cave, J. said:--

'There is in law no right without a remedy; and, if all remedies for enforcing a right are gone, the right has in point of law ceased to exist. In the case of a debt the ordinary and universal remedy is by action against the debtor. There may, however, and sometimes does exist another remedy, not by action against the debtor, but arising out of the possession of property of the debtor which by law or contract may be detained by the creditor until the debt is paid, This latter remedy may exist, although the remedy by action is barred; and in that case the debt continues to exist so far as is necessary for the enforcement of this right of lien but not for enforcing the remedy by action. When the debt is barred by the statute and the creditor has no lien, the debt is gone for all purposes.'

This was one of the decisions followed in AIR 1951 Trav-Co. 17 and Mariyakutty v. Chaladean Syrian Bank Ltd., Trichur, AIR 1957 Trav-Co. 174, In the latter case a person in possession of pledged goods was held entitled to hold those goods until he was paid the money due to him in respect of those goods even though the right to recover that money through suit had become barred by limitation. These decisions have application only to cases where the charge-holder in respect of a property comes into possession of it before the creation of the charge or before the right to recover the money charged on it becomes barred by limitation and not to cases where he comes into possession of it after the right to recover the money has become barred by limitation.

11. With regard to a person to whom money is due charged on property he has two distinct remedies. He can either sue for the money due to him at any time within the period prescribed under the Limitation Act for that purpose or if he comes into possession of the property within that period retain possession of it and at the time of surrender of possession insist on payment to him of time-barred debts charged on it also. The latter remedy is in character only a shield.

This is not a rule peculiar to cases where there are several charges in respect of a property. It applies equally well to a case where there is only one mortgage in respect of a property. To recover the money due to him charged on property a mortgagee with possession has only 12 years under Article 132 of the Limitation Act. But even after that right has become barred by limitation he can retain possession of the mortgaged property until the mortgage is redeemed, for which there is 60 years under Article 148. If a suit for redemption is filed after the expiry of 12 years but within 60 years of the mortgage the mortgagee is entitled to get the mortgage money due to him before surrender of possession of the property although the right to recover that amount through suit has become barred. But such a right can be availed of only if the mortgagee or charge-holder gets into possession of the property before the right to recover the money charged on it becomes barred by limitation. If the rule was otherwise a charge-holder whose right to recover the amount due to him becomes barred by limitation, by taking an assignment of the rights of a mortgagee with possession and getting into possession of the property can retain possession of it until the time-barred debt also is paid. But that is not the law.

12. The decisions dealing with the question as to whether the mortgagee who is not in possession of the property and whose right to recover the mortgage amount has become barred by limitation has a subsisting right to redeem an earlier mortgage in respect of the property can now be considered. In Lakshmanan v. Sella Muthu, AIR 1925 Mad 76 the Court was concerned with two mortgages in respect of the same properties in favour of two different persons. Each of the mortgagees obtained a decree on his mortgage without impleading the other and in execution purchased the equity of redemption. The puisne mortgagee after purchasing the equity of redemption in execution of the decree obtained by him bued for redemption of the prior mortgage. Following Nidhiram Bandopadhya v. Sarbessur Biswas, 5 Ind Cas 877 = 14 Cal WN 439 it was held that it was Article 132 and not Article 148 of the Limitation Act that applied to the case and that as the suit was filed more than 12 years after the date of the puisne mortgage it was barred by limitation. In Sayamali v. Anisuddin, AIR 1929 Cal 609 (FB) a Full Bench of the Calcutta High Court held that if it was supposed that it was decided in (1909) 5 Ind Cas 877 = 14 Cal WN 439 that a suit for redemption was governed by Article 132 then it was wrongly decided. In Sundar Das v. Beli Ram, AIR 1933 Lah 503 it was held following AIR 1929 Cal 609 (FB) that it was Article 148 and not Article 132 that applied to a suit by a puisne mortgagee to redeem a prior mortgage. No doubt in that case the suit by the puisne mortgagee was filed more than 12 years after the date of his mortgage. But the question as to whether he had a subsisting right to redeem the earlier mortgage was not considered. That was because the suit happened to be disposed of by the trial Court on the question of limitation and the other questions involved in the suit had to be decided by the trial Court after remand. In Ramjhari Koer v. Kashi Nath, AIR 1926 Pat 337 the learned Judges who decided that case differed from the view taken in (1909) 5 Ind Cas 877 = 14 Cal WN 439 and holding that it was Article 148 that applied to a suit by a puisne mortgagee to redeem a prior mortgage decreed redemption. No doubt in that case the suit was filed more than 12 years after the date of the second mortgage. But the question as to whether the puisne mortgagee in that case had a subsisting right to redeem was not specifically considered there. Priya Lal v. Champa Ram, AIR 1923 All 271 (2) was also a suit by a puisne mortgagee for redemption of a prior mortgage. In that case each of the mortgagees had obtained a decree on his mortgage without impleading the other and purchased the mortgagor's right in court auction. It was held that the suit for redemption by the puisne mortgage was governed by Article 148 and not Article 132 of the Limitation Act. In Ram Adhar v. Shankar Baksh Singh. AIR 1935 Oudh 139 it was observed that although a puisne mortgagee's right to recover the mortgage amount would be lost by efflux of time if he omitted to bring a suit for sale or foreclosure within the statutory period of 12 years his right as a mortgagee would not get extinguished by Section 28 of the Limitation Act. That was because that section was confined to suits for possession. It was held in that case that when a puisne mortgagee after his right to recover the mortgage amount had become barred by limitation instituted a suit for redemption of the prior mortgage it was governed by Article 148 and not 132 of the Indian Limitation Act. Nevertheless, the suit in that case was dismissed on the ground that he had no subsisting right to redeem. The reason given was that the right given to a puisns mortgagee for redemption of a prior mortgage was for the protection of his right to recover the mortgage amount and that when the remedy available to him in respect of that right had been lost by limitation he was left with nothing which required protection. In Nathmal v. Nilkanth, AIR 1933 Bom 25 also the suit for redemption was filed after the right of the puisne mortgagee to enforce his claim for the mortgage amount had become barred by limitation. Although the suit was dismissed on other grounds it was observed in that case that even though the puisne mortgagee's right to enforce his mortgage under Article 132 of the Limitation Act had become barred he was nevertheless entitled to redeem the prior mortgage. This view was dissented from by the Cochin High Court in the Full Bench decision in George v. Raghava Menon, 39 Cochin LR 480. It was observed there that if the puisne mortgagee did not sue within 12 years for the mortgage amount the foundation of his right to redeem itself disappeared. It was further observed that the words 'interest in or charge upon' occurring in Section 91 of the T. P. Act meant subsisting interest or charge.

13. A suit by a puisne mortgagee for redemption of a prior mortgage is governed by Article 148 and not Article 132 of the Limitation Act. I respectfully disagree with the decisions which have taken an opposite view. The question as to whether a puisne mortgagee has a right to redeem an earlier mortgage depends upon the construction of Section 91(a) of the T. P. Act. According to that section any person 'who has an interest in or charge upon1 the mortgaged property can sue to redeem. The expression 'any interest in or charge upon' necessarily implies a subsisting interest or subsisting charge. A mortgagee without possession of the mortgaged property and whose right to recover the mortgage money has become barred by limitation cannot be considered as a person who has a subsisting interest in or charge upon the mortgaged property. It is true that Section 28 of the Limitation Act only provides for extinction of right to property where suit for recovery of possession of that property is not filed within the period mentioned in the Act and consequently has no application to omission to file suits for money charged upon property. It is also true that if a mortgagee does not sue for recovery of the mortgage amount due to him within the period fixed in the Act only his right to recover the mortgage amount through suit becomes barred by limitation and that there is nothing in the Limitation Act or any other law to show that his other rights under the mortgage transaction would get extinguished. But has he rights in the mortgaged property other than the right to get the mortgage amount? The right to bring the mortgaged property to sale through court is the essence of the life of a charge. When that is lost by the bar of limitation, if the mortgagee is not in possession of the mortgaged property nothing survives the barred charge except an imperfect legal right not constituting an interest in the property sufficient to attract Section 91(a) of the T. P. Act and consequently unenforceable in action. The right of redemption given to a puisne mortgagee is only ancillary to his right of sale and when that right is lost by limitation the right' of redemption also becomes lost. I respectfully disagree with the decisions which have taken a different view in this respect, also.

14. As the right to recover the money due under Ext. F had become barred by limitation before the institution of the present suit the appellants have no right to redeem the mortgages, Exts. XI and XII.

In the result, this appeal is dismissed with costs.

Isaac, J.

15. I agree with the conclusions of my learned brother on the two points raised in this appeal, and that it should accordingly be dismissed with costs.


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