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The Egmore Benefit Society, 3rd Branch, Limited, by Its Secretary and Treasurer, T.G. Damodara Mudaliar Vs. K. Aburupammal and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1943Mad301; (1943)1MLJ92
AppellantThe Egmore Benefit Society, 3rd Branch, Limited, by Its Secretary and Treasurer, T.G. Damodara Mudal
RespondentK. Aburupammal and ors.
Cases ReferredFarrar v. Farrars
Excerpt:
- - this is such a well-established proposition that it cannot be disputed......the amount due under the mortgage executed by defendants 1 and 2 (husband and wife) by sale of the mortgaged property.2. the mortgage deed is dated 7th january, 1937, and is for a sum of rs. 4,350 with interest at 6 1/4 per cent. per annum and there is provision that in default of payment of arrears of subscription and interest, the arrears were to carry interest at 2 pies per rupee per month, which works out at 12 1/2 per cent. per annum. the deed provides for the exercise by the mortgagors of the power of sale provided in the transfer of property act and there is a clause authorising the society to purchase the property as the highest bidder at any such sale. default having been committed in the payment of the subscription and interest, the property was brought to sale by the society.....
Judgment:

Chandrasekhara Ayyar, J.

1. This is a suit by the Egmore Benefit Society for the recovery of possession and mesne profits of the property described in the schedule to the plaint on foot of a purchase made by the Society in a sale held by them under Section 69 of the Transfer of Property Act; in the alternative, if the sale is held to be illegal or void for any reason, the suit is for recovery of the amount due under the mortgage executed by defendants 1 and 2 (husband and wife) by sale of the mortgaged property.

2. The mortgage deed is dated 7th January, 1937, and is for a sum of Rs. 4,350 with interest at 6 1/4 per cent. per annum and there is provision that in default of payment of arrears of subscription and interest, the arrears were to carry interest at 2 pies per rupee per month, which works out at 12 1/2 per cent. per annum. The deed provides for the exercise by the mortgagors of the power of sale provided in the Transfer of Property Act and there is a clause authorising the Society to purchase the property as the highest bidder at any such sale. Default having been committed in the payment of the subscription and interest, the property was brought to sale by the Society on 15th April, 1940 and was purchased by the Society itself for a sum of Rs. 4,000 leaving a balance of Rs. 279-2-0 still due under the mortgage on that date. On the basis of this sale the Society now seeks to recover possession of the property from the defendants together with mesne profits at Rs. 50 per mensem. If the sale is held to be void or inoperative, the plaintiffs want a mortgage decree for sale for the amount due to them.

3. It has been already stated that defendants 1 and 2 are the mortgagors. The property stands in the name of the 1st defendant, the wife, having been purchased by her under a sale deed dated 15th September, 1936, from the Nedungadi Bank. The deed was executed not only by her but by her husband who acted in the transaction also on behalf of his minor sons Mohanasundara and Nagaraja, who are impleaded as defendants 3 and 4 in the suit. Mohanasundara was a minor on the date of the mortgage deed but is now a major. Nagaraja continues to be a minor, and his guardian ad litem is his elder brother, the 3rd defendant.

4. The 2nd defendant has filed no written statement and does not appear. The 1st defendant impugns the validity of the sale held under Section 69 of the Transfer of Property Act and contends that it is a void one because the purchase was by the mortgagees themselves. There is' a plea that the plaintiffs agreed after the sale to take a fresh mortgage for Rs. 4,000 and they must be compelled to stand by this agreement. But no issue was taken on this plea and it was not pressed because it is on the face of it unsustainable. It is said that the provision for payment of interest at 12 1/2 per cent. is in the nature of a penalty and should be relieved against; and that mesne profits at Rs. 50 per mensem is excessive. Defendants 3 and 4 raised an additional contention, namely, that the property .belongs to them in their own right under the will of their grandfather Arumugha Nadar, which was probated in O. P. No. 106 of 1913.

5. The sale in favour of the plaintiffs must be held to be invalid. A mortgagee exercising a power of sale under Section 69 of the Transfer of Property Act cannot purchase the property himself. This is such a well-established proposition that it cannot be disputed. But what is argued on behalf of the plaintiffs is that there is a contract in the mortgage deed authorising the mortgagee to make the purchase, if he happens to be the highest bidder at the sale. The law as understood with reference to Section 69 of the Transfer of Property Act is that the mortgagee cannot purchase the property and the Act does not save contracts between the parties to the contrary. To allow such a contract would be to negative altogether the provision based on public policy that the equity of redemption should not be destroyed except by a decree of Court or in any manner known to law. Purmananddas Jiwandas v. Jamnabai I.L.R.(1885) 10 Bom. 49 and Farrar v. Farrars, Ltd. (1888) 40 Ch. D. 395. were among the cases relied on by the plaintiffs in this connection. The facts of the two cases are entirely different from those in the present case. in the Bombay decision it was recognised that the title acquired by the plaintiff by purchase at the auction in the name of Purushotham Muljee for his own benefit on the plaintiff's behalf was liable to be impeached by the representatives of the mortgagor. As a matter of fact, there was a suit for redemption of the mortgage brought by the mortgagor's representatives notwithstanding the same. In the course of the suit however the son of the mortgagor gave an undertaking that he would not dispute the sale of the premises in question. Farrar v. Farrars, Ltd. (1888) 40 Ch. D. 395 was a case where the property was purchased in the name of a. shareholder in a corporation which was the mortgagee and the question arose whether the purchase should be deemed to be by the corporation; and it was held that, as there was no fraud of purchase by the shareholder, it need not be deemed to be a purchase by the corporation necessarily and that the sale should stand for this reason, namely, that it was not a purchase by the mortgagee but by a third party. The principle enunciated in all the cases is that a man cannot contract with himself and in such a case there cannot be any independent bargaining as between two opposite parties. This principle is not abrogated merely because there was a contract between the mortgagor and the mortgagee that the mortgagee could purchase. The purchase would nevertheless be a sale by one person to himself without any independent bargain. The equity of redemption cannot be extinguished by a mere contract for sale to the mortgagee. The mortgagee has to reach it by methods known to law.

6. At first, I thought that the provision for payment of enhanced interest at 12 per cent. per annum was penal and must be relieved against. But it is now pointed out to me, and this alters the situation materially in favour of the plaintiffs, that the higher rate of interest is not on the principal sum secured by the mortgage but is only on the arrears of interest and the monthly subscriptions which the mortgagors default in paying. This is an independent and secondary contract though connected with the primary one and there is no rule of law which says that such a stipulation must be regarded as a penal one.

7. The only other question that remains is the point taken by defendants 3 and 4 that they are entitled to the property under the will of their grandfather. This would have been relevant and material if the suit had to proceed on the basis of title. But as the sale has been held to be invalid, the suit has now become one on foot of the mortgage deed executed by defendants 1 and 2. According to the transaction the property belongs to the mother and the father appears to have joined in the execution of the mortgage deed merely as a surety. In doing so he acted also on behalf of his sons defendants 3 and 4. The plaintiffs cannot have anything higher than a personal decree against defendants 1 and 2 for the amount due and a decree for sale of the right, title and interest of the mortgagors in the mortgaged property. It is said on behalf of the plaintiffs that defendants 3 and 4 are squatting on the property not in assertion of any title in them as legatees or devisees under their grandfather's will marked Ex. D-1, but as the sons of the owner Aburupammal. This may be and probably is true having regard to the documents filed on the plaintiffs' side and marked as Ex. P-2. But it is unnecessary to investigate in this suit the independent title set up by defendants 3 and 4 under the will. They are welcome to agitate it in any appropriate proceedings that they may take for the purpose.

8. In the result, the plaintiffs will have the usual mortgage decree for sale against defendants I and 2 for Rs. . . . . which is the amount due up to the date of plaint together with costs and interest at 6 1/4 per cent. per annum from the date of the plaint till the date fixed for redemption and six per cent. thereafter. Time for redemption four months.

9. The personal decree against the and defendant will enable the plaintiffs to proceed against defendants 3 and 4 to the extent of the properties of their father in their hands. There will be no order as to costs in favour of defendants 3 and 4.


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