(1) The main question in the second, appeal is whether the rights of the plaintiff under the suit mortgage had been extinguished by merger thereof with those rights of his as a purchaser of the equity of redemption. The plaintiff, who is the first respondent in the second appeal, obtained a mortgage dated August 4, 1952, executed by defendants 1 and 2, to secure a loan of Rs. 400. On April 27, 1953, the mortgagors sold the equity of redemption to the plaintiff in consideration of a sum of Rs. 200 with a stipulation for reconveyance in their favour for the same price within a stated time. The mortgagors having assigned their right to have a reconveyance in their favour to defendants 3 and 4, at the request of the later, the plaintiff executed a reconveyance on April 11, 1956. Thereafter, the plaintiff brought the present suit to enforce the mortgage. The trial court negatived the plea of defendants 3 and 4 that the mortgage had become extinguished by merger, and decreed the suit, granting a preliminary decree. The lower appellate court, on, appeal by defendants, 3 and 4, agreed with that conclusion, but, on a different ground, namely, that the transaction dated April 27, 1953, wag a mortgage by conditional sale. Defendants 3 and 4 have, therefore, come to this court in second appeal.
(2) It is not disputed that, but for the stipulation in the sale deed dated April 27, l953, there would have been by reason of that, transaction, a merger of the rights of the mortgagee with those of his as a purchaser of the equity of redemption from defendants 1 and 2. But the contention on behalf of the appellants is that the presence of that stipulation did not make any difference, in such a case merger is the rule, and that non-merger should be confined to the cases covered by the amended S. 101 of the Transfer of Property Act. I cannot,. accept this view as sound. it is, no doubt, true that under S. 101 as it stood before the amendment, merger appeared to be the rule, Subject to certain exceptions embodied in the Section. But, after the amendment, it seems to me that there is no statutory rule of merger which was based upon the English common law. Where a mortgagee acquires the equity of redemption, normally there may be a merger of the rights. This is an the principle that a smaller interest is absorbed in the bigger. But there may be circumstances which indicate an Intention that the two rights should be kept apart. One such instance is what is embodied by the amended See. 101. In my opinion, that Section is not exhaustive In-a case covered by See. 101, as amended, the law directs that there shall not be a-merger. in other cases, it seems to me that the question whether there is a merger, will be a matter of intention depending upon the facts and circumstances of each case.
(3) In this case, the stipulation for reconveyance clearly pointed to an intention against merger, because non-merger would in the circumstances, be to the benefit of the mortgagee. If a merger is taken to have resulted, while the mortgagee would be obliged to reconvey In accordance with the agreement, he would find that he had lost his right under the mortgage. That could not obviously be the intention of the mortgagee. I consider, therefore, that the trial court was right in holding that there was no merger in this case.
(4) As I said, the lower appellate. court thought that the sale deed dated April 27, 1953, was in the nature of a mortgage by conditional sale. that view is wrong, because the transaction did net comply with the proviso to See. 58(c) of the Transfer of Property Act. There was some argument that the reconveyance from the plaintiff was of the entire right in the property. I find from the terms of the documents no justification for upholding the contention. The sale of equity of redemption by defendants 1 and 2 was for a sum of Rs. 200. The reconveyance by the plaintiff to defendants 3 and 4 was for a similar amount. Apart from that, the sale deed itself dated April 11, 1956 is clear enough to show that what was conveyed thereunder was only the equity of redemption, and not the entire property.
(5) The next contention urged by the appellants relates to interest. It was said that the plaintiff having been put in possession pursuant to the sale deed dated April 27 1953, he would not be entitled to interest on the morgtage for the period during which he was in possession of the property. It seems to me that there is force in the contention. The mortgagee, who is not entitled to possession under the terms of the mortgage, would clearly be accountable for the profits from the property during the time he was in possession thereof as a purchaser of the equity of redemption It is stated that, on reconveyance by the plaintiff, possession had been delivered to defendants, 3 and 4. I hold, therefore, that the plaintiff will not be entitled to interest on, the amount due under the morgage for the period from April 27, 1953 to April 11, 1956.
(6) Subject to the modification contained In the preceding paragraph the second appeal fails and is dismissed with costs. Time for Payment, four months.
(7) Appeal dismissed.