1. Additional defendants 2 to 5 and 7 are the appellants. The suit was one for redemption of a mortgage. Plaintiffs 5 to 7 are the children of Salia Ummal, a sister of plaintiffs 1 to 4. Plaintiffs J to 4 and deceased salia Ummal are the children of Mytheen Kunju Atima Kunju. Plaint A and B schedule properties belonged to the deceased father and mother of plaintiffs 1 to 4 and deceased Salia Ummal. Mytheen Kunju Atima Kunju and his wife executed the original of Ext. A mortgage to one Muhammad Kunju Ibrahim Kutti for Rs. 1500. In accordance with the provision in that deed the income of the property was to be appropriated towards the interest due for Rs. 1000 and for the balance of the mortgage money of Rs. 500, 9 per Cent, interest was to be paid by the mortgagor personally. On the basis of a prior hypothecation bond a stranger had obtained a decree in O. S. No. 429 of 1091 charged on A schedule property. Ext. D is the copy of that decree. A schedule property was brought to sale and was purchased by the mortgagee under the original of Ext. A for 7050 fs. Ext. C is the sale certificate and Ext. D the execution diary in that case. The court sale was on 14-4-1002. Ibrahim Kutty before purchasing the property in court sale had made an application to court for permission to bid. That application has not been produced in this case. The purport of it, as is gatherable from the execution diary, is that since the mortgagee wanted to protect his interest in the property he was asking for permission to bid in the auction. The decree-holder in O. S. No. 429 of 1091 withdrew the amount due to him under the decree and the balance of the sale amount after satisfying the decree in O. S. No. 1003 of 1091 was drawn by the auction-purchaser after executing a security bond to the court. The mortgagee Ibrahim Kutti subsequently died and A and B schedule properties fell to the share of his daughter who sold the same to the 1st defendant under Ext. C on 23-11-1118 for Rs. 3800. The plaintiffs claiming to be the owners of the equity of redemption have instituted the suit for redeeming Ext. A mortgage on A and B schedule properties. They have also claimed the right to recover mesne profits of the property.
2. The main contentions of the defendants were that the plaintiffs were not the legal representatives of Atima Kunju and his wife, that theywere not entitled to redeem A schedule property as that property was sold in execution of the decree in O. S. No. 429 of 1091 and that the 1st defendant had become the owner of that property, that they are entitled to get Ks. 1500 plus the full interest on Rs. 500 as mortgage money and that they were entitled to get the value of improvements.
3. The court below has come to the conclusion that the plaintiffs were entitled to redeem both A and B schedule properties, that the purchase by the mortgagee of A schedule property in execution of the decree in O. S. No. 429 of 1091 would enure to the benefit of the mortgagor, that the mortgage was still subsisting on A schedule items also, that the plaintiffs were entitled to redeem the mortgage on depositing Rs. 1500/- interest on Rs. 500/-amounting to a moiety, the sale amount in execution of the decree in O. S. No. 429 of 1091 and the value of improvements viz. Rupees 439-9-10 1/2.
4. This decree was challenged by counsel for appellants mainly on two grounds. (1) that the court below was wrong in directing redemption of A schedule property as that property had already been sold and purchased by the mortgagee in execution of the decree in O. S. No. 429 of 1091 and (2) that even if the A schedule item was not available for redemption, he was entitled to recover the whole amount of Rs. 1500 plus Interest on Rs. 500/- without any limit as to moiety as mortgage money. He also raised a subsidiary contention that he was entitled to the full value of improvements effected by him on A and B schedule properties. So, the first point for consideration in this appeal is whether the plaintiffs are entitled to redeem A schedule property. The reason given by the lower court for allowing the plaintiffs to redeem and schedule property cannot be sustained. The court below thinks that because the mortgagee had applied for permission to the court to participate in the bid and to purchase the property, the purchase must enure to the benefit of the mortgagor. The court below also relied on the fact of the withdrawal of the balance of the purchase money from court after satisfying the two decrees, to reinforce its conclusion that the purchase was on behalf of the mortgagor.
5. So far as the first ground is concerned, it was not obligatory upon the mortgagee under any law that he should obtain permission of the court for participating in the bid and for purchasing the property. We do not think that the fact that he applied to Court for permission to purchase the property is a ground for holding that the purchase was for the benefit of the mortgagor.
6. Secondly, the statement made by him in the petition that it was to protect his interest in the property that he was purchasing the property would go to show that he did not purchase it for and on behalf of the mortgagor. The mortgagee was not a party in O. S. No. 429 of 1091 and therefore that decree was not binding on his interest in the property. There was therefore no reason for the mortgagee to apprehend that his security would be destroyed or diminished if the property was allowed to be purchased by a stranger. If the property was purchased on behalf of the mortgagor we fail to understand what advantage the mortgagee was gaining by the purchase. If a stranger had purchased the property it would have been open to him to redeem the mortgage. The same would have been the case if the purchase was made by the mortgagee on behalf of the mortgagor.
7. The second ground was that Rs. 62-9-10 1/2 the balance of the purchase money was withdrawn by the mortgagee auction-purchaser and that showed his intention to purchase the property on behalf of the mortgagor. We are unable to accept the argument as correct. The fact that he executed a bond to the court undertaking liability to produce the amount in court when called upon to do so would show he was not drawing the amount in any representative capacity. At any rate, we think that that circumstance is not sufficient to warrant the conclusion that the purchase was on behalf of the mortgagor.
8. The question whether a purchase by a mortgagee In execution of a decree against the mortgagor of the equity of redemption would have the effect of extinguishing the equity or redemption of the mortgagor came up for consideration in Mrutunjay Pani v. Narmada Bala Sasmal, AIR 1961 SC 1353. There it was held by Subba Rao J. that one circumstance which would extinguish the mortgage is, where a mortgagee in possession and bound to pay the rent under the mortgage commits default and purchases the property in execution of the decree for arrears of rent, the sale being the result of a manifest dereliction of duty imposed upon the mortgagee by the terms of the transaction. We think that unless there is a default in the performance of some obligation owing by him to the mortgagor under the contract of mortgage or under the general law, a purchase by the mortgagee in execution of his mortgage decree with the leave of the Court or in execution of a mortgage or money decree obtained by the third party would extinguish equity of redemption of the mortgagor and in that event the mortgagor cannot sue for redemption without getting the sale set aside. But where a mortgagee purchased the mortgaged property by reason of a default committed by him, the mortgage is not extinguished and the relationship of the mortgagor and the mortgagee will continue to subsist even thereafter for, his purchase of the equity of redemption is only in trust for the mortgagor. Here, we cannot find any circumstance, which would make the mortgagee a trustee for the mortgagor. -
9. Reliance was placed by the respondent upon the ruling reported in 12 Trav. LT 1151. We do not think that the rule laid down in that case can have any binding force after the decision of the Supreme Court in AIR 1961 SC 1353. We I therefore find that the mortgagee was not a trustee for the equity of redemption to the mortgagor and hold that the right of the plaintiffs to redeem Aschedule property was extinguished by the sale and delivery in O. S. No. 429 of 1091.
10. The next question for consideration is what is the mortgage amount payable for redemption of the B schedule property. Mr. Krishnamoorthy, counsel for the appellants, urged that for redeeming the mortgage on B schedule property his clients are entitled to get the whole of the mortgage money together with the interest due thereunder. His argument was that the purchase by the mortgagee of an item of property included In the mortgage has not the effect of extinguishing the charge on that item and that his clients are entitled to recover the whole mortgage money from the mortgagor and not the proportionate mortgage amount payable on B schedule property. He relied upon the rulings reported in Jasodha Kumar v. Kali Kumar, AIR 1930 Cal 619, State Govt. v. Ithi, AIR 1953 Nag 253 and Shriram v. Trimbak, AIR 1927 Bom 514 for the proposition that when a mortgagee purchases an Item of property included in the mortgage in execution of a decree against the mortgagor, he is not bound to give credit for the proportionate mortgage amount that may fall due on the Item so purchased, and would be entitled to get the whole of the mortgage amount. We think that the correct rule in such circumstances is the one laid in AIR 1930 Cal 619. That rule is this:
'Where the mortgagee purchases a portion of the mortgaged property the determination of the question whether the whole of the mortgage-debt is chargeable on the remaining property mortgaged depends on whether the mortgagee purchased only the equity of redemption or the entire interest of the mortgagor and in the latter case no portion of the mortgage debt is extinguished.'
11. We think that in this case what was purchased by the mortgagee was only the equity of redemption and not the entire Interest in the property. It may be recalled that the mortgagee was not made a party to the suit in O. S. No. 429 of 1091 and therefore that decree was not binding on him. It is clear that under such circumstances, if the property had been purchased by a third party, the purchase could only have been of the equity of redemption. There is no reason to think that this is not the case when the mortgagee has himself purchased the property so long as there are no circumstances to indicate that he purchased the full Interest in the property free of the mortgage. We, I therefore, hold that the mortgagee is entitled to get only the proportionate mortgage amount due on the B schedule property.
12. Since it was held by the court below that both items could be redeemed, it has not made an apportionment of the mortgage amount. We have therefore to remand the case to the court below to find what is the proportionate mortgage amount due on B schedule property. In this connection the argument of Mr. Krishnamoorthy that his clients were entitled to recover the whole interest and not a moiety on the 500 rupees had also to be considered by the court below.
13. The only other point argued is the one relating to improvements. There also, there is no data to and the value of improvements effected on the B schedule property. The commissioner who submitted the report has not shown in his report the value of improvements effected on A and B schedule properties separately. Therefore, the lower court is directed to investigate and find the value of improvements due to the defendants In respect of B schedule property. It is open to the lower court to issue a commission for that purpose.
In the result, the decree of the lower court is set aside to the extent indicated above and the case is remanded to the court below for a decision in the light of the observations made in this judgment. The appellants will be entitled to get a refund of half the court-fee paid on the memorandum of appeal. The rest of the costs in this court will toe provided in the decree to be passed by the court below. The appeal is disposed as above.