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Muhammathu Pathummal Nabia Yathu Ummal Vs. Abdul Kasian Muhammed Mytheen and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKerala High Court
Decided On
Case NumberSecond Appeal No. 63 of 1959
Judge
Reported inAIR1964Ker225
ActsTransfer of Property Act, 1882 - Sections 60
AppellantMuhammathu Pathummal Nabia Yathu Ummal
RespondentAbdul Kasian Muhammed Mytheen and ors.
Appellant Advocate K.S. Paripoornan, Adv.
Respondent Advocate G. Viswanatha Iyer, Adv. for Respondent No. 23
DispositionAppeal allowed
Cases ReferredIndependent Coal and Coke Co. v. United States
Excerpt:
.....of decree and its sale - whether there was any obligation on part of mortgagees to discharge debt of a - mortgagees purchased properties from a and not directly at auction sale - a was purchaser at auction - mortgagees not allowed to take advantage of their own wrong and plead that by reason of such wrong there has been extinction of mortgage - when property came into mortgagees hands they must hold equity of redemption in trusts for mortgagors - mortgagees were trustees of equity of redemption for mortgagors - plaintiff entitled to redeem property as prayed for - preliminary decree for redemption passed - trial court directed to pass final decree after finding value of improvements and mortgage amount payable to mortgagees - appeal allowed. - - the defendants were clearly in..........fs. or at any rate, an amount sufficient to pay off the debt due to raman pillai. they could have paid raman pillai with that amount and claimed the balance from the mortgagors for paying the debt of narayana pillai later on.5. these circumstances show that the mortgagees were in default in the performance of their contractual obligation. . they committed a breach of contract thus entailing the sale of the property.'to break a contract is an unlawful act, or, in the language of lord watson in alien v. flood, 1898 ac 1 at p. 96, 'a breach of contract is in itself a legal wrong.' ............... any party to a contract can break it if he chooses; but in point of law he is not entitled to break it even on offering to pay damages. if he wants to entitle himself to do that he must stipulate.....
Judgment:

K.K. Mathew, J.

1. The 6th additional plaintiff is the appellant. The suit was for redemption. It was dismissed by both the lower Courts. Hence the appeal.

2. The plaint property is 32 cents of land within the limits of the Trivandrum corporation. It belonged to the 1st plaintiff. He and his father Bhagavathi Asari mortgaged it to defendants 1 to 6 for 10500 fs. on 13-9-1090 under Ext. B. The term of the mortgage was for 25 years. 79 fs. were paid in cash to the mortgagors and the rest of the consideration was recited to be paid to third parties, and the mortgagors. There was a recital to pay P. W. 3, Parameswaran Pillai Raman Pillai, 798 fs. and another recital to pay 1568 fs. to one Narayana Pillai. The amount due to Narayana Pillai was a charge on the plaint property. 2100 fs. were reserved with the mortgagees to be paid on the registered receipt of the mortgagors on a later date. The other recitals are not material for this case. Raman Pillai instituted a suit in O. S. 63/1091 and obtained a decree and sold the plaint property in execution and got delivery of possession under Ext. I. (The fact of actual delivery is not admitted by the plaintiffs). Thereafter the property was sold by Raman Pillai to defendants 1 to 6 on 20-1-1096. Defendants 1 to 6 had instituted a suit O. S. 739/1094 and applied for an injunction to restrain Raman Pillai from taking delivery of possession of the property through Court. Ext. C is the plaint there. It was after the institution of this suit that Raman Pillai sold the property to defendants 1 to 6 under Ext. E. From that sale it is clear that defendants 1 to 6 had not till then paid off the debt recited to be paid under Ext. B to Narayana Pillai.

3. The suit was resisted on the ground that the defendants 1 to 6 had become the owners of the property by the purchase under Ext. E and that the plaintiff was not entitled to redeem the mortgage.

4. The main question for consideration therefore is whether the mortgage under Ext. B was extinguished on account of the purchase by Raman Pillai of the property in execution of the decree in O. S. 63/1091 and its sale under Ext. E. That will depend upon the question whether there was any obligation on the part of the mortgagees to discharge the debt of Raman Pillai. The defendant's case was that there was no amount reserved with them as mortgagees to pay off the debt due to Raman Pillai, as the consideration for the mortgage was 10500 fs. whereas the recitals to be paid by defendants 1 to 6 amounted to 11500 fs. It was contended that while the consideration for Ext. B was 10500, the debts recited to be paid together with the payment already made and to be made to the mortgagors amounted to 11500, and therefore, it was not possible for defendants 1 to 6 to pay off the amount recited to be paid to Raman Pillai. Both the Courts below relying on this circumstance have come to the conclusion that mortgagees were not trustees of the equity of redemption for the mortgagors. It is said that after paying off the other debts and the amount reserved to be paid to the mortgagors there was not any amount for paying the debt of Raman Pillai. But, would that circumstance exonerate the defendants 1 to 6 from their contractual liability to pay the amount? Under Ext. B they had undertaken to pay off the amount due to Raman Pillai. If they had not enough money to pay Raman Pillai, their obvious duty was to deduct the amount due to Raman Pillai from the amount payable to the mortgagors and pay Raman Pillai and avert the sale. The fact that the mortgagors were parties to the suit instituted by Raman Pillai is immaterial for deciding the question of the liability of the mortgagees in this case. There was an unconditional contract in Ext. B that the mortgagees would discharge the debt due to Raman Pillai. If for any reason they could not discharge the debt it was incumbent on them to have notified that fact to the mortgagors so that they might pay off the debt due to Raman Pillai. There is no evidence in this case to show that the mortgagees issued any notice stating the fact that the amount reserved with them was insufficient to pay off Raman Pillai's debt. The mortgagees need not have paid the amount reserved with them to be paid to the mortgagors, if as a matter of fact, they wanted to discharge the debt due to Raman Pillai. It is seen from the registered receipts, produced m the lower appellate Court, that the amount due to the mortgagors were paid on 27-9-1090 and 25-11-1090. Raman Pillai instituted the suit only in 1091. At the time when they paid the amounts under these receipts, they should have withheld' an amount sufficient to pay Raman Pillai. They could have justified that action by reference to their contractual obligation under Ext. B. There Is nothing in the evidence to show that the mortgagors were aware of deficiency in the amount reserved with the defendants 1 to 6 for paying the debt of Raman Pillai at the time of the decree in O.S. 63/1091. Secondly, it is seen that at the time when the property was sold in execution of the decree obtained by Raman Pillai, the mortgagees had not discharged the debt due to Narayana Pillai. The mortgagees therefore had with them 1568 fs. or at any rate, an amount sufficient to pay off the debt due to Raman Pillai. They could have paid Raman Pillai with that amount and claimed the balance from the mortgagors for paying the debt of Narayana Pillai later on.

5. These circumstances show that the mortgagees were in default in the performance of their contractual obligation. . They committed a breach of contract thus entailing the sale of the property.

'To break a contract is an unlawful act, or, in the language of Lord Watson in Alien v. Flood, 1898 AC 1 at p. 96, 'a breach of contract is in itself a legal wrong.' ............... Any party to a contract can break it if he chooses; but in point of law he is not entitled to break it even on offering to pay damages. If he wants to entitle himself to do that he must stipulate for an option to that effect. Non-lawyers are apt to think that everything is lawful which is not criminally punishable; but this is an entire misconception.' (See South Wales Miners' Federation v. Glamorgan Coal Co., 1905 AC 239, at p. 253).

It has therefore to be held that the purchase of the property by Raman Pillai was occasioned, by the commission of a wrong namely the breach of the contract embodied in Ext. B. If that be so, when the property came into the mortgagees' hands they must hold the equity of redemption in trust for the mortgagors. In K. Achan v. K. C. Velayudhan, AIR 1954 Mad 144, Venkatarama Ayyar, J., as he then was, although posed this question for consideration did not give a final answer to the same. It is stated at page 148:

'The further question whether the mortgage reattaches to the property when the mortgagee purchases it from the landlord does not arise for decision in the present case; and when it does arise, it will be a matter for consideration whether the decision in Gauri Shanker v. Sheotahal Gir, AIR 1936 Pat 434, should be followed in preference to the decision in Sanagapalli Lekshmayya v. Intoory Bolla Reddi, ILR 26 Mad 385.'

In Ram Rup Singh v. Jang Bahadur Singh, AIR 1951 Pat 566 it was held that a mortgagee who was directed to pay the rent to the landlord, defaulted in the payment of rent and caused the holding to be sold by the landlord and subsequently got a settlement of the property from the landlord, was bound to hold the equity of redemption for the benefit of the mortgagor. The case was put on the basis that the mortgagee cannot take advantage of his own wrong. At p. 568 it is said:

'In my opinion, the defendants, by taking the settlement from the landlords, could not change the character of their possession as against the plaintiffs. The defendants were clearly in the wrong in allowing the property to be sold and, therefore, if the holding has come back into their hands, they cannot take advantage of their own wrong and deprive the plaintiffs of their right of redemption,'

6. In ILR 26 Mad 385 Benson and Bhashyam Ayyangar JJ., have held that where a mortgagee defaults in the payment of arrears of revenue and occasions a sale of the property, and the property is purchased by a third party, and is subsequently sold to the mortgagee, the mortgagee was bound to hold the property subject to the mortgage. The ruling was based on the principle that a man cannot be allowed to take advantage of his own wrong.

7. This principle, in my opinion, is applicable to the present case notwithstanding the fact that the property vested free of mortgage in Raman Pillai; and the fact- that the mortgagees did not purchase properties themselves at the auction sale but from Raman Pillai, who was the purchaser at the auction sale, makes no difference as between themselves and their mortgagors. The mortgagees cannot be allowed to take advantage of their wrong and plead that by reason of such wrong there has been an extinction of the mortgage. The principle applicable in this case is the same as that applicable in the case of a trustee who transfers the trust property in violation of the trust to a bona fide purchaser for value, and thereafter repurchases the property from the bona fide transferee for value. That principle has been expounded by Mr. Justice Stone in Independent Coal and Coke Co. v. United States, (1926) 274 US 640, at p. 647 as follows:

'It is ancient and familiar learning that one who fraudulently procures a conveyance may not defeat the defrauded grantor or protect himself from the consequences of his fraud by having the title conveyed to an innocent third person.........Equity may follow the property until it reaches the hands of an innocent purchaser for value. Even then the wrongdoer may not reacquire it free of the obligation which equity imposes on one who despoils another of his property by fraud or a breach of trust. The obligation in personam to make restitution persists and may be enforced by compelling a return of the property itself whenever and however, it comes into his hands......... So also, a purchaser with notice of an outstanding equity, despite a transfer to an innocent purchaser for value, may not on a later repurchase hold free of the equity.'

8. In the result, I hold that the mortgagees were trustees of the equity of redemption for the mortgagors and that the plaintiff was entitled to redeem the property as prayed for by him in the plaint. I therefore pass a preliminary decree for redemption and direct the trial Court to pass final decree after finding the value of improvements and the mortgage amount payable to the defendants-mortgagees. The decrees of the Courts below are set aside and the second appeal allowed. The parties will bear their costs here and in the Courts below.


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