1. This is an appeal from the judgment in appeal of the Subordinate Judge of South Malabar at Palghat confirming the decree of the District Munsiff of Alathur in favour of the plaintiff in O.S. No. 90 of 1943. The first defendant in the suit is the appellant.
2. The plaintiff had been the karnavan of the Kavasseri Vadakke Meledom. By the decree in O.S. No. 35 of 1917 in the Court of the District Munsiff of Alathur, he was removed from the management of the Edom, but the decree at the same time provided that the plaintiff was to be given 300 paras of paddy per annum by the Edom for his maintenance. The karnavan who was appointed in the plaintiff's place was removed by the decree in O.S. No. 14 of 1925 in the District Munsiff's Court of Alathur and defendants 2 and 3 in the present suit were appointed managers in his place. Subsequent to the decree in O.S. No. 35 of 1917 the managers mortgaged the properties of the Edom. On the 1st of November, 1927, they executed a usufructuary mortgage for Rs. 7,350 in favour of the first defendant, and then on the 24th of July, 1929, they executed a second mortgage of the properties for Rs. 4,450,also in favour of the first defendant. According to the terms of the first mortgage to the first defendant, Ex. D-4, dated 1st November, 1927, a sum of Rs. 6,728-2-3 was reserved out of the mortgage money for the payment by the first defendant of certain debts due by the Edom. Included in these debts was a sum of Rs. 1,225 which was due under a prior mortgage. The first defendant appears to have paid off the other debts but he did not discharge the amount due under the prior mortgage. Under the mortgage of 1st November 1927, the property had been leased back to the Edom. This arrangement proved unsatisfactory, and by the second mortgage of 24th July, 1929, Ex. D-5 the first defendant was put in possession of the properties subject to certain conditions which are set out in the mortgage deed. Out of the total pattom of 2,514 paras and 5 danglis of paddy the first defendant was to pay himself 1,242 paras of paddy in respect of interest on the mortgage money, 666 paras and 6 1/2 danglis was to be paid by him in respect of Government assessment and michavaram payable to the jenmi; 300 paras of paddy was to be paid to the plaintiff in the present suit in accordance with the terms of the decree in O.S. No. 35 of 1917, and the balance of 305 paras and 8 1/2 danglis of paddy was to be paid to the Edom. Finally, the deed recited that the mortgage amount was liable for arrears of purappad, interest, etc. As already stated the first defendant never did pay off the prior mortgage although the money was reserved with him and the prior mortgagee one Kunhi Raman Nair filed O.S. No. 79 of 1933 to enforce the mortgage. Defendants 2 and 3 were parties to the suit but allowed it to proceed ex parte against them. A decree for sale was passed. The mortgage money was not paid and the properties were brought to sale and purchased by the first defendant.
3. The plaintiff had recovered the paddy due to him under the decree in O.S. No. 35 of 1917 and the mortgage deed, Ex. D-5, by attachment up to 1934-35. From January-February, 1935, the payments of paddy fell into arrears and he filed' E.P. No. 1319 of 1939 in O.S. No. 35 of 1917. In this petition the paddy was. attached by means of a prohibitory order and the plaintiff was appointed receiver to collect it. Nothing was realised in pursuance of this execution petition and three years later, the plaintiff filed another petition E.P. No. 829 of 1942. A second prohibitory order was passed and then the plaintiff filed the present suit O.S. No. 90 of 1943 as receiver for the recovery of 2,400 paras of paddy by sale of the usufructuary mortgage right of the first defendant in the Edom properties. The first defendant contested the suit on the ground that the usufructuary mortgages, Exs. D-4 and D-5 had been extinguished by virtue of the sale of the properties to him in execution of the decree in O.S. No. 79 of 1933. He also pleaded that the plaintiff and defendants 2 and 3 were barred from impugning the validity of the auction sale to the first defendant by reason of the proceedings in O.S. No. 79 of 1933 and by reason of the decree in O.S. No. 303 of 1940.
4. Substantially the ground on which the learned District Munsiff decreed the suit and the learned Subordinate Judge confirmed his decree was that the first defendant had taken advantage of his position as mortgagee to gain an advantage for himself so that under the provisions of Section 90 of the Trusts Act he held the advantage for the benefit of the mortgagors, and without much further discussion they concluded from this finding that the two mortgages, Exs. D-4 and D-5, continued to subsist so that the plaintiff was entitled to recover the paddy expressed to be payable to him under the mortgage deed, Ex. D-5. In our opinion the essential questions in the case are whether the first defendant in failing to pay off the prior mortgage and then himself purchasing the property at the Court auction sale took advantage of his position within the meaning of Section 90; and if the answer to the first question is in the affirmative, what consequences ensue. It will however be convenient' to refer to one or two other points before the case is reduced to what we consider to be the essential questions at issue. With regard to the plea of res judicata, O.S. No. 79 of 1933 is no bar because the plaintiff was not a party to the suit and because in any case no question as between the first defendant and the managers of the Edom arose in the suit itself. Defendants 2 and 3 had no defence. They had either to pay the mortgage money or to allow a decree for sale to be passed. The other suit O.S. No. 303 of 1940 was, it is true, brought to recover purappad from the first defendant under the terms of the mortgage deed, Ex. D-5 and it was dismissed. The plaintiff was not a party to the suit but the third defendant was.. He was not however a party in his capacity as the manager of the Edom. but in his private capacity and the decree in the suit cannot bind the Edom. There was also some discussion in the lower Courts as to how far the mortgage deed, Ex. D-5 created a charge on the mortgage for the payment of the purappad and there has been some argument before us on the subject. If the deed gave the plaintiff a charge he would undoubtedly be entitled to enforce it despite the decree in O.S. No. 79 of 1933 and the sale in execution of that decree as he was not a party to that suit. The mortgage deed, Ex. D-5, it seems to us clear, while it gives a charge to the Edom in respect of the purappad payable under the deed does not give any charge to the plaintiff personally. It has been argued by Mr. Kuttikrishna Menon for the first defendant appellant that the charge is in any case only in respect of the purappad payable to the Edom, namely, 305 paras of paddy per annum. We do not accept this construction of the deed. The deed gives a charge in respect of the purappad and the 300 paras made payable to the plaintiff is part of the purappad payable to the Edom by the first defendant although diverted by the terms of the deed to the plaintiff. In any case if the mortgages subsist even after the sale to the first defendant, as there is a charge in respect of the purappad payable to the Edom, there can be no question of limitation.
5. The argument advanced by Mr. Kuttikrishna Menon for the appellant is first that it was not the case of the plaintiff that the mortgages continued in force despite the Court auction sale because the plaintiff had taken undue advantage of his position as mortgagee, and no issue was raised on this subject. Secondly that whatever the legal position in consequence of the sale might be as between the first defendant and the managers of the Edom, the rights and liabilities of these parties would have to be worked out in appropriate proceeding. On the face of it the mortgages have been extinguished by the sale to the first defendant, and the plaintiff has no standing which entitles him to bring a suit for recovery of the paddy payable to him under the extinguished mortgages; and thirdly, that even if the first defendant is found to have taken undue advantage as a mortgagee, the consequences under Section 90 of the Trusts Act are not those which the lower Courts thought them to be. The sale extinguished the mortgages and the only right given to the mortgagors under Section 90 is the right to recover the property on payment of the mortgage money and any expenses legitimately incurred by the first defendant as mortgagee.
6. In our opinion, there is little substance in the first two points. It is stated specifically in paragraph 16 of the plaint that the first defendant had improperly caused the properties to be sold in auction and had purchased them himself by failing to pay off the mortgage debt as he had undertaken to do, and that 'he cannot take advantage of his own wrong.' No doubt the legal position was misconceived and it was maintained that by reason of the conduct of the first defendant the sale was void. The question of the consequences which ensued from the first defendant's conduct, however, is covered by the first three issues framed in the suit and was fully canvassed. Mr. Kuttikrishna Menon contends that, in any case, there is no proof that the first defendant availed himself of his position as mortgagee with a view to gaining an advantage by the purchase of the properties at the Court auction sale. The plaintiff of course could not adduce evidence to prove what was in the first defendant's mind but he did point to the circumstances and he cross-examined him, successfully, to show that the price of paddy had not fallen but had risen and he was in a position to discharge the mortgage debt. Both the lower Courts have found that the first defendant refrained from paying off the prior mortgage with' a view to purchasing the property himself. Their findings are inferences of fact, and perfectly reasonable inferences. We should certainly not be justified in differing from these findings in second appeal.
7. With regard to the second point, we do not agree that the plaintiff had no cause of action and that the mortgages must be regarded as extinguished until the rights and liabilities as between the first defendant and the managers of the Edom had been worked out in a properly constituted suit. The managers of the Edom were made parties to the suit as the second and third defendants, and they supported the plaintiff's case. The plaintiff in fact in his execution petition ignored the mortgages and based his claim to the paddy supply on the ground that it was purappad payable to the Edom. But whether he attached the paddy as due to the Edom which was bound to pay it to him under the decree in O.S. No. 35 of 1917 or as due to him under the terms of the mortgage deed Ex. D-5 he was certainly entitled to it unless the first defendant was no longer obliged to pay the paddy because he had become the absolute owner and the mortgages were extinguished. Whether the first defendant had in fact become the absolute owner was an issue which the plaintiff was clearly entitled to raise in a suit for sale of the property to recover the amount due to him. It remains only to deal with the argument that, even if the first defendant availed himself of his position as mortgagee to gain an advantage within the meaning of Section 90 of the Trusts Act, the only remedy open to the persons whose interests have been affected is to sue for a reconveyance of the properties after payment of the amount due on the mortgages and the expenses properly incurred by the first defendant as mortgagee. The consequences to the parties of the acceptance of this argument as correct would be that the mortgagors could regain possession of the property on payment of the mortgage money; they would not have to pay more as the first defendant was obliged to discharge the prior mortgage and he retained for himself the excess of the purchase price over the amount required to discharge it but that until this payment was made the first defendant would remain in possession without any obligation to pay the purappad which under the terms of the second usufructuary mortgage he was bound to pay. The principle embodied in Section 90 of the Trusts Act is the principle that a person shall not be allowed to profit from his own wrong. We find it difficult to see how the first defendant would not have been allowed to gain an advantage from his own wrong if the argument advanced by Mr. Kuttikrishna Menon is accepted. He enjoys the property without paying the purappad which he has obliged himself to pay under the deed--Ex. D-5--until the mortgagors can find funds to pay the mortgage money. Mr. Kuttikrishna Menon however argues that the sale is valid so that the mortgages are extinguished and their terms cannot be enforced, and contends that in no reported case will it be found that the mortgagor has been given any remedy except the right to recover the property on payment of the mortgage money and the expenses properly incurred by the mortgagee. In support of his contention he has referred to illustration (c) to Section 90 of the Trusts Act. Illustration (c) runs as follows:
A mortgages land to B, who enters into possession. B allows the Government revenue to fall into arrear with a view to the land being put up for sale and his becoming himself the purchaser of it. The land is accordingly sold to B. Subject to the repayment of the amount due on the mortgage and of his expenses properly incurred as mortgagee, B holds the land for the benefit of A.
It seems to us that the illustration merely states that the mortgagor retains his equity of redemption and his right to redeem but that in order to redeem he may have to pay the expenses properly incurred by B as mortgagee as well as the mortgage money. Section 90 itself provides that a person who has gained an advantage within the meaning of the section ' must hold, for the benefit of all persons so interested, the advantage so gained but subject, etc.' The Act is the Indian Trusts Act and the meaning of the section clearly is that the person who has gained the advantage holds that advantage as it were in trust for the persons over whom the advantage has been gained. In the present case what is the advantage gained by the first defendant If the second and third defendants had no remedy, he has obtained an absolute interest in properties which he had previously only enjoyed, subject to the mortgagor's equity of redemption and the obligation to pay them 605 paras of paddy per annum. In our judgment on a proper construction of Section 90 the first defendant does not merely hold the land until the mortgagors choose to pay the amount due under the mortgage and any expenses that he may properly have incurred as mortgagee; he holds the lands for the benefit of the mortgagors according to their interests at the date of sale which will include the right to receive 605 paras of paddy annually.
8. Among the cases cited, it is true, there is no case directly in point in the sense that a mortgagor has been permitted to enforce a term of the mortgage as if the mortgage subsisted unaffected by the sale to the mortgagee. This, however, would seem to be because this question has not precisely arisen. On the other hand in only one of the cases cited Deo Nandan Prashad v. Janki Singh (1916) 32 M.L.J. 206 : L.R. 44 IndAp 30 : I.L.R. 44 Cal. 573 (P.C.) was the suit brought merely for the reconveyance of the property sold in consequence of the advantage taken by the mortgagee. In the other cases the suits were brought for redemption either under Section 90 of the Trusts Act or on general principles of equity. That is, they were brought on the footing that the mortgage subsisted despite the sale, and they were decided on the principle that where the mortgagee had taken undue advantage the mortgagor's equity of redemption was not lost by reason of the sale to the mortgagee. In Babaji v. Magniram I.L.R. (1895) Bom. 396, for instance, the Forest Department wanted certain land for its own purposes which was in the possession of a mortgagee. In the absence of the mortgagor the Government revenue was deliberately allowed to fall in arrear, the land was forfeited to Government, and the mortgagee was given other land S. No. 105--as compensation. On a suit by the successor in interest of the mortgagor it was held that he was entitled to redeem S. No. 105 as the mortgagee had lost the equity of redemption in the mortgaged land by fraud so that the land which he had obtained in exchange was subject to the mortgage. In Arokiam Asari v. Vavana Rowthan (1926) 52 M.L.J. 135, the fifth defendant had obtained an othi over part of the property mortgaged by first defendant to the plaintiff. Owing to default on the part of the fifth defendant in paying the Government revenue the property was brought to sale and purchased by the fifth defendant himself. Subsequently, the first defendant acknowledged his liability under the mortgage in favour of the plaintiff and the question in the case was whether this acknowledgment affected the fifth defendant and his representatives. Reilly, J., held that it did and that under Section 90 of the Trusts Act, the fifth defendant must hold the land subject to the plaintiff's mortgage. Chhita Bhula v. Bai Jamni I.L.R. (1916) Bom. 483, Lakshmayya v. Appadu I.L.R. (1883) Mad. 111, Jaikaran Singh v. Sheo Kumar Singh I.L.R. (1927) All. 36, are all cases in which it was held that the mortgagor's equity of redemption subsisted despite the sale to the mortgagee who had taken advantage of his position as such.
9. Deo Nandan Prashad v. Janki Singh (1916) 32 M.L.J. 206 : L.R. 44 IndAp 30 : I.L.R. 44 Cal. 573 (P.C.), the case to which reference has already been made, is relied on by Mr. Kuttikrishna Menon because in this case the suit was brought for the reconveyance of the properties. It seems clear to us that the suit was brought for reconveyance of the properties sold to the mortgagee because that was the only remedy open to the plaintiffs who were principally aggrieved. They were not mortgagors at all. The co-sharers in possession of a three annas share in a twelve annas share of certain property had mortgaged their three annas share with possession to a minor. The guardian of the minor allowed the Government revenue to fall into arrear and then when the whole twelve annas share was put up for sale by Government purchased it for the minor. The only remedy open to the co-sharers in respect of the other nine shares was to sue for reconveyance of payment of contribution. No doubt a decree was also made for reconveyance of their shares to the mortgagors. Nothing, however, was said of their mortgage and it may be presumed that having paid their share of the contribution the position between them and their mortgagee was as before. The mortgagee would remain in possession while the mortgagors of the three annas share retained their equity of redemption. In the course of his judgment in Deo Nandan Prashad v. Janki Singh (1916) 32 M.L.J. 206 : L.R. 44 IndAp 30 : I.L.R. 44 Cal. 573 (P.C.), Sir Lawrence Jenkins said that the sale stood but that in the circumstances the transaction was nothing more than the payment of an arrear of revenue enuring for the benefit of all. In our judgment, in the present case, although the sale to the mortgagee stands it is in effect nothing more than a discharge of the prior mortgage which he was bound to make and which enures for the benefit of the mortgagors.
10. For the reasons given we are of opinion that the first defendant holds the property for his mortgagors subject to the same rights and liabilities as obtained at the date of sale except for the obligation on the part of the mortgagors to pay the expenses, if any, properly incurred by the first defendant. That being so the first defendant's obligation to pay the purappad persisted, and the plaintiff was entitled to attach the paddy and recover the amount due to him by sale of the first defeadant's right in the property.
11. The appeal is dismissed with costs.