1. The main question for determination in this appeal is whether the plaintiffs' right of redemption is affected by the provision in Exhibit III, or by defendant's; subsequent possession of the mortgaged property after the date prescribed for discharge of that document.
2. The facts are simple. On 14-11-74 by Exhibit A 1st plaintiff's father effected a mortgage with possession (kanom) of the plaint properties to defendant's ancestress Kunhachumma for 36 years for Bs. 3000. On 12-8-75 he executed another document Ex. III, which is in effect a simple mortgage on the same lands for Rs. 400. It was therein provided that if the latter amount with interest thereon was not discharged by 13-8-76 the mortgagor had no objection to the mortgagee's holding and enjoying the property as jenmam. It is admitted that the latter phrase means in absolute ownership and that the object of the clause is to terminate plaintiffs' right of redemption of both mortgages, Exhibit A and Exhibit III.
3. Both documents were executed long before the enactment of the Transfer of Property Act, and following the decisions in Thumbusami Moodaly v. Hussain Rowthen I.L.R. (1876) M. 1, Ramaswami Sastrial v. Samiyappa Naicken (1882) I.L.R. and Venkatasubbiah v. Venkayya I.L.R. (1892) M. 230 : 1 M.L.J. 677, it seems to me, we have no option but to hold that this clause in restraint of the right of redemption is per se, inoperative.
4. It is however argued that although this may be so, yet the effect of the agreement of parties in Exhibit III is to alter the character of the possession of defendants or their ancestor from 13-8-76 and to render it adverse to the title of the mortgagor. This being so, defendants must after 12 years uninterrupted possession (which is not denied), have acquired full title to the property and plaintiff's right to redeem must be regarded as extinguished.
4. If no agreement of parties to a mortgage can operate, ipso facto to clog or restrain the equity of redemption and that is the law which has been declared to be applicable in Madras from 1858 up to the passing of the Transfer of Property Act (vide decisions above quoted) I find it difficult to understand how, consistently with this view, agreement of parties to a mortgage can affect the character of the mortgagee's possession so as to convert it from that of a mortgagee, into that of a person prescribing for a full title.
5. The chief authority relied on by appellants is Usman Khan v. Dasama I.L.R. (1912) M. 545 : 28 M.L.J. 360, In that case a relinquishment by the mortgagor in favour of the mortgagee was held invalid to extinguish the equity of redemption, but, being followed by a continuance in possession of the mortgagee for more than the statutory period, the mortgagor's right to redeem was held to be extinguished. The learned judges were of opinion that it was open to the parties to agree in what character the mortgagee should hold possession and that they had agreed by the relinquishment above referred to that his possession thereafter should be as absolute owner. What distinguishes that case from the present one is this : The relinquishment or agreement was not only after the expiry of the period of mortgage, but after the enactment of the Transfer of Property Act, Section 60 of the latter provides that the right of redemption may be extinguished by act of parties, and this at once removes the case from the purview of the rulings already cited. None of them are in fact referred to.
7. In my opinion the possession of defendants after 13-8-76 must be treated as still that of mortgagees and not adverse to the mortgagor.
8. The only ether question is whether plaintiffs are bound to redeem Exhibit III or whether defendant's rights thereunder have become extinguished under Article 132 of Schedule I of the Limitation Act.
9. Reliance is placed on Section 20 of the Act and it is argued that defendants having admittedly failed to pay plaintiffs the porappad due under Exhibit A, it should be presumed that they appropriated it towards the interest due under Exhibit III year by year and that each such appropriation gives a fresh starting point of limitation. This argument hardly deserves serious consideration. Exhibit III makes no provision for payment of interest annually, but only on a single date (13-8-76). Apart from this, the appropriation thereto is a pure fiction, which we are not justified in raising and which was in fact not raised in defendant's written statement, Respondent contends with some reason, that a payment under Section 20 must be a conscious act. It may be taken as certain that no such appropriation was ever contemplated by the parties and it cannot be treated as a fact for the purpose of saving limitation.
10. Lastly it is contended that it is open to defendants to set up their right as mortgagees in a suit for possession although their right to enforce payment under Exhibit III may be barred under Article 132. No authority has been quoted which seems to support such a proposition in this case. Defendants' possession is under another mortgage, Exhibit A, which it is sought to redeem and not under Exhibit III. Their rights under the latter have clearly become time barred and plaintiffs cannot be compelled to redeem them.
11. The appeal must be dismissed with costs. Time for payment extended to 4 months from this date.
12. I agree. Exhibit III is dated 12th August 187 5. There can be no doubt that under the equitable principles held in Ramaswami Sastrial v. Samiyappa Naicken I.L.R. (1882) M. 179, Venkatasubbiah v. Venkayya I.L.R. (1892) M. 230 : 1 M.L.J. 677, and Neelakandhan v. Ananta Krishna Aiyar I.L.R. (1907) M. 61 : 16 M.L.J. 462, to be applicable to mortgages executed subsequent to 1858 and prior to 1882 the forfeiture clause must be treated as a mere clog on the equity of redemption and no bar to a suit for redemption. (Vide Shephard.and Brown's Transfer of Property Act, pp. 239 to 243 where the history of the litigation that preceded the introduction of the Act is discussed). The effect of the Act was, to preserve the same equity of redemption unfettered, Section 60 providing that only an independent act of the parties or an order of court could operate to extinguish it. See Perayya v. Venkata I.L.R. (1888) M. 403.
13. The agreement in Exhibit III that the mortgagee should enjoy the properties as his jenrn if payment was not made by August 13th, 1876 cannot be treated as affording a starting point for adverse possession to run against the mortgagor, because no act was done on that date to alter the character of the mortgagee's possession. The mortgagee still remained in possession under Exhibit A which ran for a term of 36 years from 1874. It has been found by the District Judge that Kunhachumma and her heirs and representatives did not begin to deal with the properties as their jenm ealier than 12 years before suit. Usman Khan v. Dasanna I.L.R. (1912) M. 545 : 23 M.L.J. 360, cited for the appellants, was a case in which by a term in the original mortgage deed it was provided that on the happening of a certain event, the mortgagee was to hold possession as an absolute owner, and when that event happened the parties at once showed by their acts and admissions that they had mutually agreed to alter the character of the possession according to the terms in the deed. Shanhar Din v. Gokal Prasad I.L.R. (1912) A. 620 was a case where parties to a mortgage entered into a separate arrangement or compromise limiting the right of redemption. So long as the possession of Kunhachumma is capable of being attributed to the right she acquired under Exhibit A to enjoy the land as Kanomdar, there is no reason to regard it as possession adverse to the jenmi merely by reason of the inoperative clause in Exhibit III. In this connection I would refer to the observations of Bashyam Iyengar, J. in Seshamma Shettathi v. Ghihayya Hegadi I.L.R. (1902) M. 507 : 12 M.L.J. 119 as to the incapacity of a tenant or usufructuary mortgagee by setting up a title adverse to that of his landlord or mortgagee to acquire a title inconsistent with that under which he was let into possession before the period prescribed for the determination of his tenancy or the redemption of his mortgage, as the case may be, expires.
14. As to the question whether plaintiffs were bound to redeem Ex. Ill, which is styled a bond and is I think rightly treated by the Lower Courts as a simple mortgage with a clog on the equity of redemption, the mortgagee might have sued upon it at any time up to August 8th, 1910, notwithstanding the decision of the Privy Council in Vasudeva Mudaliar v. Srinivasa Pillay I.L.R. (1907) M. 426 : 17 M.L.J. 444, that suits upon simple mortgages are governed by Article 132 of Schedule II of the Limitation Act, which allows 12 years from the date when the money becomes due. Section 31(1) of the Act specially allowed 60 years from the date of the money becoming due or 2 years from the passing of the Limitation Act of 1908 for mortgagees to institute suits for sale or foreclosure whichever period expired first. The 2 years expired first, and on the 11th January 1911 when this suit was instituted the mortgagees had already lost their right to recover the loan.
15. But it is argued that the defendants being in possession are entitled to rely on Exhibit III in bar of plaintiffs' suit although a suit to enforce their rights under the document may be barred. It has been often expressed that a defendant may in equity set up a defence that a certain instrument is, by reason of its invalidity or other defect, ineffectual against him, although if he sued to have it avoided or declared a nullity, his suit would be barred by limitation vide Lakshinidas v. Roop Lal I.L.R. (1907) M. 169 : 17 M.L.J. 19, Ramaswami v. Muthusami Naik (1909) 25 M.L.J. 561, and Srikishan Lal v. Mussamat Kashmiro (1916) 31 M.L.J. 362.
16. This is very far from establishing a proposition that a party has a substantive right to compel his opponents to discharge a barred debt before they can succeed in their suit. In Parasurama Pattar v. Venkatachellam Pattar (1913) 25 M.L.J. 362 , where it was held that a mortgagor and a mortgagee are under mutual obligations to make all payments provided in the mortgage deed so long as the relationship of mortgagor and mortgagee continues, it was expressly stated that this rule did not extend to payments which the parties were liable to make otherwise than under the contract of mortgage. The liability of the parties under Exhibit III is distinct from their liability under the mortgage sought to be redeemed in the suit, Although the defendants are no doubt entitled by way of equitable defence to set up the clause in Exhibit III that provides against redemption after a fixed time we have already held that this clause is inoperative to bar redemption.
17. The plea that limitation has been saved by the appropriation of rents towards interest is one into which I consider we cannot now enter as it is not made a ground of second appeal, nor was it argued on the receipt of a finding in the Lower Appellate Court upon this question of Exhibit III being time barred. Besides, the defendant's written statement has not been printed, and we are not now in possession of the necessary materials for deciding this mixed question of law and fact.
18. The claim for post diem interest has not been raised in the memo, of second appeal and must be disallowed.
19. I am of opinion that this second appeal should be dismissed with costs.