Skip to content


Ayilavajjula Subbaraya Sarma Vs. Chilakapati Subramanyam - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai High Court
Decided On
Case NumberSecond Appeal No. 2212 of 1948
Judge
Reported inAIR1952Mad856; (1952)2MLJ55
ActsTransfer of Property Act, 1882 - Sections 58, 67 and 68
AppellantAyilavajjula Subbaraya Sarma
RespondentChilakapati Subramanyam
Appellant AdvocateP. Satyanarayana Raju and ;M.B. Rama Sarma, Advs.
Respondent AdvocateK. Umamaheswaram, Adv.
DispositionAppeal dismissed
Cases ReferredNarasingh Partab Bahadur Singh v. Mohammad Yakub Khan
Excerpt:
.....and 68 of transfer of property act, 1882 - whether mortgagee entitled to sue for recovery of his money by sale of hypothecation - if under mortgage deed mortgagor expressly binds himself to deliver possession of mortgaged properties he cannot institute suit for sale under section 67 - section 68 does not either expressly or by necessary implication confer him any right to realize amount by sale of hypothecation - held, mortgagee not entitled to sue for recovery of his money by sale of hypothecation. - - 2. one venkatachelamayya executed a will dated 19-10-1926 whereunder he bequeathed the plaint scheduled properties along with others to the first defendant, his wife, to be enjoyed by her for her lifetime and the remainder to his daughter's son, the 2nd defendant. 401. the facts in..........question in this second appeal is whether the mortgagee is entitled to sue for recovery of his money by sale of the hypotheca.2. one venkatachelamayya executed a will dated 19-10-1926 whereunder he bequeathed the plaint scheduled properties along with others to the first defendant, his wife, to be enjoyed by her for her lifetime and the remainder to his daughter's son, the 2nd defendant. the 5th defendant is the daughter of the said venkatachelamayya and defendants 2 to 4 are her sons. one pitchireddi in whose favour venkatachelamayya executed a promissory note filed o. s. no. 769 of 1932 on the file of the district munsif, nellore, against the first defendant to recover the money due thereunder, and he obtained a decree on 16-12-1932. another creditor of venkatachelamayya filed o......
Judgment:

Subba Rao, J.

1. The only question in this second appeal is whether the mortgagee is entitled to sue for recovery of his money by sale of the hypotheca.

2. One Venkatachelamayya executed a will dated 19-10-1926 whereunder he bequeathed the plaint scheduled properties along with others to the first defendant, his wife, to be enjoyed by her for her lifetime and the remainder to his daughter's son, the 2nd defendant. The 5th defendant is the daughter of the said Venkatachelamayya and defendants 2 to 4 are her sons. One Pitchireddi in whose favour Venkatachelamayya executed a promissory note filed O. S. No. 769 of 1932 on the file of the District Munsif, Nellore, against the first defendant to recover the money due thereunder, and he obtained a decree on 16-12-1932. Another creditor of Venkatachelamayya filed O. S. No. 1022 of 1932 and obtained a decree therein. On 17-8-1932, the first defendant executed a conveyance in favour of the 2nd defendant in respect of her life interest in the suit properties. In execution of the decree in O. S. No. 769 of 1932 the properties were brought to sale. When the 2nd defendant filed a claim petition it was dismissed. He filed O. S. No. 20 of 1934 on the file of the District Munsif's Court, Nellore, to set aside the order in the claim petition.

In execution of the other decree when the same properties were attached, the 2nd defendant filed another claim petition but that was allowed. The 2nd defendant and the decree-holder in O. S. No. 1022 of 1932 filed two suits for setting aside the order in the claim petitions. It was held in those suits that the decrees could be executed against the estate of Venkatachelamayya. On 19-9-1942 the 1st defendant executed a usufructuary mortgage deed, Ex. P-3 in favour of the plaintiff for a sum of Rs. 600. The consideration amount went in discharge of the decree in O. S. No. 769 of 1932. The mortgagee was not able to obtain delivery of possession of the mortgaged property. He filed O. S. No. 808 of 1945 for recovery of the amount due under the mortgage deed by sale of the mortgaged properties.

3. Various contentions were raised by the defendants; they denied that the mortgage deed, Ex. P-3 was supported by consideration. They questioned the validity and binding nature of the mortgage on the 2nd defendant. They also contended that the plaintiff was not entitled to sue for the recovery of the mortgage money by sale of the mortgaged property.

4. The District Munsif, and in appeal the District Judge, held that the mortgage was supported by consideration and was binding upon the second defendant. They also held that the mortgage amount could be recovered by sale of the mortgaged properties.

5. The only question raised in the appeal was whether Ex. P-3 could be enforced by sale of the hypotheca. As aforesaid, Ex. P-3 was executed on 19-9-1942 for a sum of Rs. 600. Under the document the interest accrued due for each year had to be paid in that year. In default of payment of interest, the interest so accruing should be included once a year with the principal and the total amount should be paid together with interest thereon. Till the amount of the principal and interest due was paid in full the mortgagee was put in possession and he was directed to take ' the net income towards the debt. The mortgagor also specifically agreed thereunder that when the money was available he would pay the amount of principal and interest accrued due by him to the mortgagee and get the mortgage deed cancelled and take back the document. Though the document purported to give possession to the mortgagee the 1st defendant did not give possession, of the property to the plaintiff.

6. On these facts the question that arises for consideration is whether the mortgagee was entitled to sue for the sale of the mortgaged property.

7. The answer to the question turns upon the construction of some of the provisions of the Transfer of Property Act. The relevant provisions are:

'Section 58(d). Where the mortgagor delivers possession or expressly or by implication binds himself to deliver possession of the mortgaged property to the mortgagee, and authorises him to retain such possession until payment of the mortgage money, and to receive the rents and profits accruing from the property or any part of such rents and profits and to appropriate the same in lieu of interest, or in payment of the mortgage-money, the transaction is called an usufructuary mortgage, and the mortgagee an usufructuary mortgagee.'

(the words 'expressly or by implication binds himself to deliver possession' were inserted by the Amending Act of 1929).

Section 67 : 'In the absence of a contract to the contrary, the mortgagee has at any time alter the mortgage money has become due to him, and before a decree has been made for the redemption of the mortgaged property, or the mortgage money has been paid or deposited as hereinafter provided, a right to obtain from the court a decree that the mortgagor shall be absolutely debarred of his right to redeem the property, or a decree that the property be sold........

Nothing in this section shall be deemed

(a) to authorise any mortgagee other than a mortgagee by conditional sale or a mortgagee under an anomalous mortgage by the terms of which he is entitled to foreclose, to institute a suit for foreclosure, or an usufructuary mortgagee as such or a mortgagee by conditional sale as such to institute a suit for sale.'

Section 68(1): The mortgagee has a right to sue for the mortgage money in the following cases and no others, namely;

(a) where the mortgagor binds himself torepay the same;

* * *

(d) where the mortgagee being entitled to possession of the mortgaged property, the. mortgagor fails to deliver the same to him or to secure the possession thereof to him without disturbance by the mortgagor or any person claiming under a title superior to that of the mortgagor.'

8. The learned counsel for the appellant contended that the plaintiff is an usufructuary mortgagee within the meaning of Section 58(d) of the Act and therefore under Section 67(a) the remedy by judicial sale is denied to him. Before Section 58 of the Act was amended, the aforesaid sections were subject to judicial interpretation by two Full Bench decisions of this court. In -- 'Arunachalam v. Ayyavayyan', 21 Mad 476 a Full Bench of this court consisting of Shcphard O. C. J. and Davios and Moore JJ. held that a usufructuary mortgagee to whom the mortgagor fails to deliver or to secure possession of the property mortgaged is not entitled to claim in a suit for the money an order for the sale of such property. At page 431 the learned Judges say :

'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.'

The later Full Bench decision reported in -- 'Subbamma v. Narayya', 41 Mad 259 overruled the earlier one. There the learned Judges held that where a mortgagor fails to deliver possession to his mortgagee, the mortgage is not a usufructuary mortgage within the meaning : of Section 58(d) of the Transfer of Property Act, and the mortgagee is entitled to bring a suit for sale of the mortgaged property. At page 263 the learned Judges observed:

'A mortgagee to whom possession has not been given is not a usufructuary mortgagee. Consequently he does not come within the proviso & is entitled to sue for foreclosure or sale under the section in the absence of a contract to the contrary 'at any time after the mortgage money has become payable to him.'

The basis of this judgment, namely, that a mortgagee to whom possession has not been given is not a usufructuary mortgagee is statutorily overruled by the amendment of Section 58 in the year 1929. Now as the section stands, if under the mortgage deed the mortgagor expressly or by implication binds himself to deliver possession of the mortgaged property to the mortgagee, the transaction is a usufructuary mortgage notwithstanding the fact that actual possession has not been delivered. If such a transaction is a usufructuary mortgage, Section 67 of the Act does not empower a mortgagee to institute a suit for sale. Section 68 only confers a right on the mortgagee to sue for the mortgage money when the mortgagor fails to deliver the property to him without disturbance by the mortgagor or any person claiming under a title superior to that of the mortgagor. This does not either expressly or by necessary implication confer on him a right to realise the said amount by sale of the hypotheca. In the contingency contemplated by the section ho will be able only to obtain a decree for money.

9. The learned counsel for the respondents relied on the decision of the Judicial Committee in -- 'Narsing Partab Bahadur Singh v. Mohammad Yakub Khan', 58 M.L.J. 401. The facts in that case were that the mortgagors failed to discharge their obligation of making over possession to the mortgagee and thereby deprived the mortgagee of part of his security. The mortgage in that ease was a combination of a simple and a usufructuary mortgage. The Judicial Committee held that the money became payable under Section 68 and that the mortgage could bring the property to sale under Section 67 of the Transfer of Property Act. The learned counsel relied upon the following observation at page 406 :

'.........In these circumstances their Lordships are of the opinion that, under Section 68 the money has become payable and the plaintiff is entitled to a money decree for the same, but if the money has become payable under Section 68 their Lordships are further of the opinion that under Section 67 a decree for sale can be made.'

It is true that the aforesaid observations, divorced from the context and the facts of the case, may appear to lend support to the learned counsel's contention. But in ray view those observations should be confined only to a case of a mortgage, which is a combination of a simple and an usufructuary mortgage, for in that case Section 67(1) will not exclude the mortgagee's right to realise the money by bringing the hypotheca to sale. I would, therefore, hold that the Full Bench decision -- 'Subbamma v. Navayya', 41 Mad 259 is no longer good law; and it must be deemed to have been statutorily overruled by the amendment of Section 58 in the year 1929.

10. Even so the learned counsel for the respondent contended that the mortgage in the insrant case is a composite one, being a combination of a simple and a usufructuary mortgage; and, therefore, the Privy Council case would apply. His argument was that the document contains a personal covenant to pay and such a covenant confers upon the mortgagee a remedy by judicial sale. A perusal of the document discloses a clear and unambiguous personal covenant to pay. After stating the details of the consideration, the document proceeds to saythat 'the principal and interest shall be paid'. The mode of payment is also pointed out, namely, the mortgagee who is put in possession is directed io credit the net profits towards the mortgage. In addition, the mortgagor specifically agrees to pay the principal and interest under the mortgage deed whenever the money is available. The words are:

'As soon as the amount is available, I shall pay the amount of principal and interest accrued due by them to you under me mortgage deed, get the mortgage cancelled and take back this document:'

These words contain a clear personal covenant to pay. But the learned counsel for the appellant contended that a mere personal covenant to pay does not carry with it the right to bring the property to sale, particularly, when the document provided the method of discharge, (11) There is a conflict of decisions on the question whether a personal covenant to pay will in itself confer a remedy by judicial sale. The learned counsel for the appellant relied upon a number of decisions of other High Courts in support of his argument. It is unnecessary to consider them as the Madras view is clearly expressed by Bench decisions binding on me. In -- 'Ramayya v. Guruva', 14 Mad. 232 there was a suit for sale by a mortgagee. The mortgage deed contained a covenant by the mortgagor for payment of the mortgage amount but otherwise it answered the definition of usufructuary mortgage contained in the Transfer of Property Act, Section 58(d). The document contained a covenant for payment of the amount within a particular date. The learned Judges Handley and Weir JJ. held that the mortgagee was not precluded by the Transfer of Property Act (Section 67) from bringing the property to sale under the mortgage. The fact that the mortgagee who has put in possession should take the produce towards the mortgage was not considered to be an obstacle in holding that there was a personal covenant and that such a covenant attracted the provisions of Section 67.

In -- 'Sivakami Ammal v. Gopala Sevundram', 17 Mad 131 , a Full Bench of this court held that a suit for sale by a mortgagee was maintainable as the bond contained a covenant to pay. The mortgage deed there contained the following covenant:

'I shall pay to you the said mortgage amount in Chitrai Kalavathi Year 1883 and take back this deed of mortgage with possession and the cancelled bonds mentioned above.' It was also recited in the document that the properties were put in the possession of the mortgagee for the debt. The learned Judges held that they wore clearly of the opinion that the mortgage deed contained a covenant to pay and therefore a suit for sale would lie. In --'Muhammad Naina Thambi Maracayar v. Siddhi Muhammad'. 1937 M. W. N. 81, where there was a personal covenant to pay the learned Judges held that the said covenant carried with it a right of the mortgagees to bring a suit for sale to recover the mortgage amount. There, the document after stating that the mortgaged property was put in the possession of the mortgagee so that he might enjoy the income, contained the following covenant: 'In default we shall in any year in which the holder make a demand (or require) pay the mortgage amount and redeem the mortgage.'

The learned Judges construed the said covenant as a personal covenant to pay. At page 82 they observed : 'The learned counsel for the appellant however has relied on the case reported in --Kashiram v. Sardar Singh'. 28 All 157, where it was held that the insertion of personal covenant in a usufructuary mortgage did not alter the nature of the mortgage. The learned Judges in that case dissented from a series of Madras decisions to the contrary, one of the Madras decisions being the Full Bench decision reported in -- 'Sivakami Ammal v. Gopala Savundram', 17 Mad 131 . We however are unable to dissent from the current of authorities established in this court. We must, therefore, hold that this instrument Ex. A contains a personal covenant by the mortgagors to pay the mortgagees the mortgage amount and carries with it the right of the mortgagee to bring a suit for sale to repay the mortgage amount.' The decision of the Judicial Committee reported in -- 'Narasingh Partab Bahadur Singh v. Mohammad Yakub Khan', 58 M.L.J. 401 already considered by me in another connection also adopts the Madras view. In that case the mortgage deed was a combination of a simple mortgage and usufructuary mortgage. It was so held to be a composite mortgage because of the personal covenant contained therein. The Judicial Committee held that because of that personal covenant a decree for sale could be made under Section 67 of the Transfer of Property Act. I therefore hold that the decree of the lower court giving a preliminary mortgage decree for sale is correct.

12. The appeal is dismissed with costs. Noleave.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //