1. The Lower Appellate Court was right in holding that the instrument sued upon, which purports to be a usufructuary mortgage, contains no covenant to pay. Nevertheless as possession of the land comprised in the instrument was not given to the alleged mortgagees, this suit for the recovery of the money said to be due would lie under Section 68 of the Transfer of Property Act, if the instrument sued on represents a real transaction and is not a mere collusive document as alleged by the defendants and if the claim is not time-barred.
2. As to the first point the Lower Appellate Court recorded no finding. As to the latter point, that depends upon the further question whether in a case like this a decree for the sale of land could be properly given.
3. Before entering into the question of limitation it appears to us advisable that there should be a finding upon the question whether there was a real mortgage or whether the plaint mentioned instrument was a mere sham document. The District Judge should submit a finding upon the above question on the evidence on record.
4. The finding is to be returned within thirty days from the receipt of this order, and seven days will be allowed for filing objections after the finding has been posted up in this Court.
5. [In compliance with the above order the District Judge submitted his finding which was to the effect that the instrument sued on was a real mortgage and did not represent a sham transaction.]
6. This second appeal then coming on for hearing before the same Divisional Bench after the receipt of the above finding, the Court made the following order of reference to the Full Bench:
7. Order, of Reference to the Full Bench.--The instrument sued upon being found to be not a mere sham transaction, but a real mortgage, it is necessary to decide the question of limitation. The suit is barred if the plaintiff cannot ask for a decree for sale, but is not barred, if he can. Is he then entitled to claim such relief? According to Samayya v. Nagalingam I.L.R. 15 Mad. 174 he cannot claim the relief. But a decision to the contrary was arrived in Linga Reddi v. Sama Rau I.L.R. 17 Mad. 469 Of these views it is difficult to agree with the one adopted in the former ruling. For that view of the law would sometimes lead to a practically absurd result as where a man grants a usufructuary mortgage of the only item of property he owns, but omits to deliver or fails to secure possession of the property to the mortgagee. In such a case if the mortgagee sues and obtains a decree for the money, it would in reality be useless. For under Section 99 of the Transfer of Property Act he cannot cause the property to be sold without getting a decree for sale, and such decree he cannot get according to the view referred to. This very anomalous result could not have been intended by the Legislature. No doubt Section 67 of the Transfer of Property Act lays down that a usufructuary mortgagee as such cannot institute a suit for sale. That Section, however, evidently contemplates the case of a usufructuary mortgagee in possession and enjoyment of the property mortgaged. It is true that Section 68, which refers to the case of a mortgagee who has been denied such possession and enjoyment, whilst giving a right to sue for the money says nothing about his title to an order for sale. That cannot however be held to prohibit by implication such an order being given in his case. The object of the Section is to point out in what cases a mortgagee can sue for the mortgage money and not to lay down whether in so suing he can ask for the sale of the mortgaged property. This is manifest from Clause (a) of the Section since it cannot be argued that in the case referred to therein, viz., where there is a covenant to pay, no order for sale can be claimed because no reference to such an order is to be found in the Section. The reason why a usufructuary mortgagee cannot ordinarily sue for the mortgage money of course is that the. parties to such a transaction intend that the money ought not to be claimed so long as the mortgagee is in possession of his security. When however that consideration fails through the fault of the mortgagor, it is but just that the mortgagee should have the right to claim not only the money but also as accessory thereto an order for the realization of the money by means of that which undoubtedly was originally intended to secure its payment, though that intention was to be carried out in a different way, i.e., by giving possession of the security. It is impossible to see what claim the mortgagor who is in default can have upon the consideration of the Court, so as to warrant it in declining to grant to the mortgagee, the party wronged, what in certain circumstances would be the only effective remedy, viz., an order for sale.
8. The following question is, therefore, referred for the decision of a Full Bench:
9. Is a usufructuary mortgagee, to whom the mortgagor fails to deliver or to secure possession of the property mortgaged, entitled to claim in a suit for the money, an order for the sale of such property?
10. The case then came on for hearing before the Full Bench constituted as above.
11. Desikachariar for Appellants.--It is submitted that the question referred should be answered in the affirmative. [Davies, J.--Why did you not sue for possession? Such a suit would not be barred.] The plaintiff elected the other remedy. See Section 67 of the transfer of Property Act. The Section presupposes the continuance of the charge under the mortgage. [Shephard J.--You want to sell. Where does the Act give a usufructuary mortgagee the right to sue for sale?] It is the ordinary remedy of a charge-holder, and under Section 58 (d) without possession the mortgage is not usufructuary. If the mortgagor does not give possession the mortgage is not a usufructuary mortgage--but of course the mortgage lien subsists. See Samayya v. Naga- lingam I.L.R. 15 Mad. 174. In any veiw the plaintiff's posi- tion is not less than that of a charge-holder. [Shephaed, J.--Your security was right to possession. You have abandoned that.] I have not abandoned the security, but I do not want to be in possession. [Davies, J.--You want now a remedy which you could not exercise, if you had taken possession.] I have the option, if I was in possession I could not sell by reason of Section 67. [Davies, J.--Is it not a usufructuary mortgage under the circumstances?] Possession is necessary for that. [Davies, J.--What sort of mortgage is it? it is a mortgage conferring alien: however it is classified it is not usufructuary within the definition till possession is given. [Davies, J.--What kind of mortgagee are you? you must be simple or usufructuary.] Some mortgages do not come under any of the recognized classes and must be regarded as anomalous; under certain circumstances the plaintiff could not enforce the right of sale, but under the present circumstances he can, see Linga Reddy v. Sama Rau I.L.R. 17 Mad. 469 . When there is a covenant to pay, he could bring property to sale. [Shephard, J. You want to be in the same position as if you had an express covenant.] In the case of a usufructuary mortgage with a covenant to pay the mortgagee is in the same position as simple mortgagee. My contention is that as possession was not given to me I am entitled to sue in the same way as if I was a simple mortgagee--See Umda v. Umrao Begam I.L.R. 11 All. 367. Venkatasami v. Subramanya I.L.R. 11 Mad. 88 and Chathu v. Kunjan I.L.R. 12 Mad. 109 only apply to cases where possession has been given. I submit the security is not taken away. As long as security remains, there is right to sell, but it is only taken away when the usufructuary mortgagee is in possession.
12. Ayya Ayyar for Respondents: referred to Hira Lal v. Ghasitu I.L.R. 16 All. 318 .
13. Desikachariar in reply: In Hira Lal v. Ghasitu I.L.R. 16 All. 318 the mortgagees were in possession constructively through their tenants.
14. Judgment.--Assuming that the facts of the case are such as to raise any question under Section 68 of the Transfer of Property Act, we are of opinion that the plaintiff is not entitled to institute a suit for sale.
15.The contention really is that at the option of the mortgagee or in the cases mentioned in Section 68, a usufructuary mortgagee is entitled to have his mortgage treated as'a simple mortgage. The right to sue for sale is not provided for by the contract between the parties and is not to be found in Section 68 without doing violence to the language of the Section. In the case of Linga Reddi v. Sama Rau I.L.R. 17 Mad. 469 the point now raised does not seem to have been decided. There is no hardship in the matter, for the remedy is to sue for possession of the property for which he has bargained. We answer the question in the negative.
16. [The second appeal coming on again for final hearing after the expression of the above opinion of the Full Bench, it was dismissed with costs.]