Skip to content


P. Saraswathi Bai Vs. P.T. Varadarajulu Naicker and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai High Court
Decided On
Reported in(1956)1MLJ223
AppellantP. Saraswathi Bai
RespondentP.T. Varadarajulu Naicker and ors.
Cases ReferredKing v. Heepan
Excerpt:
- .....transfer of property act.5. the notion that the mortgagee can appoint a private receiver of the mortgaged property who is to act as the agent of the mortgagor is, as pointed out in the a.i.r. commentaries on the transfer of property act, page 1273, not familiar in this country, but has been borrowed from the english law where a mortgagee is the legal owner of the mortgaged property and is entitled to be in possession. the history of the rule in england was stated by rigby, l.j., in gaskell v. gosling l.r. (1896) 1 q.b. 669 as follows:.he (i.e., the mortgagee in possession) did not come under any obligation to account to the mortgagor except in a suit for redemption. he was accordingly treated with exceptional severity in a suit for redemption and made to account, not only for what he.....
Judgment:

Ramaswami, J.

1. This is an application for leave to bring the property now in the possession of the third respondent to sale.

2. To meet certain urgent expenses a registered deed of simple mortgage, dated 6th April, 1949, was executed by respondents 1 and 2, who are members of a joint undivided Hindu family in respect of their property No. 12, Venkatier Street, Muthialpet, in favour of the petitioner for a sum of Rs. 11,379-4-6. The mortgage deed confers specifically upon the mortgagee in this Presidency Town the right of private sale. Inasmuch as the mortgagors had failed to pay interest even for a single month, the principal and interest were accumulating and the value of house property was going down in Madras, the mortgagee took steps under Sections 69 and 69-A of the Transfer of Property Act. The property was brought to sale repeatedly after complying with all formalities required by Section 69, and Messrs. Murray & Co. were the auctioneers. But, owing to the obstructive tactics of the mortgagors and their family the property could not be sold for a proper price. The mortgagee then resorted to proceedings under Section 69-A and by order of this Court, dated 30th July, 1953, Panchapakesa Ayyar, J., appointed J.R. Alwar Naidu as receiver under Section 69-A. The mortgagee has filed this application stating that, though she is entitled to enforce the concurrent right to bring the property to sale by public auction under Section 69 notwithstanding the appointment of a receiver under Section 69-A, she is advised in view of the appointment of a receiver by this Court it will be better by way of abundant caution to obtain leave of this Court before bringing the property to sale by public auction through the auctioneers, if such leave is considered necessary.

3. This application is opposed on grounds which are totally irrelevant for the subject-matter on hand.

4. The short point for determination is whether leave of this Court is necessary for the mortgagee to exercise her right of private sale under Section 69 on account of a receiver being appointed by this Court at the instance of the mortgagee under Section 69-A of the Transfer of Property Act.

5. The notion that the mortgagee can appoint a private receiver of the mortgaged property who is to act as the agent of the mortgagor is, as pointed out in the A.I.R. Commentaries on the Transfer of Property Act, page 1273, not familiar in this country, but has been borrowed from the English Law where a mortgagee is the legal owner of the mortgaged property and is entitled to be in possession. The history of the rule in England was stated by Rigby, L.J., in Gaskell v. Gosling L.R. (1896) 1 Q.B. 669 as follows:.he (i.e., the mortgagee in possession) did not come under any obligation to account to the mortgagor except in a suit for redemption. He was accordingly treated with exceptional severity in a suit for redemption and made to account, not only for what he actually received, but for what he might without wilful default have received. This was bad enough when there was only one mortgage; but the position became much worse when the mortgage was a second mortgage, since the second mortgagee could at any moment be turned out by the first.... Still greater were the risks and less desirable the possession, when the mortgaged property consisted of or included, as it might do, property embarked in trade and subject to the vicissitudes of commercial business.... The Courts also favoured any means which would enable the mortgagee to obtain the advantages of possession without its drawbacks. Mortgagees began to insist upon the appointment by the mortgagor of a receiver to receive the income, keep down the interest on incumbrances, and hold the surplus, if any, for the mortgagor, and to stipulate often that the receiver should have extensive powers of management. Presently mortgagees stipulated that they themselves should in place of the mortgagor appoint the receiver to act as the mortgagor's agent.... So common did this practice of appointing receivers by agreement between the parties become that, first by Lord Cranworth's Act (23 and 24, Vict. C 145) to a limited extent, and afterwards by the Conveyancing and Law of Property Act, 1881, in a more general manner, a power to the mortgagee to appoint a receiver, who was to be agent of the mortgagor, was made a usual incident of mortgages, when not excluded by agreement between the parties.

6. In this country, the Trustees' and Mortgagees' Powers Act (XXVIII of 1866) first introduced provisions corresponding to the English rule with certain restrictions. But the scope of that Act was confined in those cases only to which the 'English Law' was applicable. In cases to which the English Law was not applicable the mortgagee had no power to appoint a private receiver of the mortgaged property but it was recognised that a 'mortgagor could' by agreement of parties, appoint a receiver, nominated by the mortgagee and that such receiver would be the agent of the mortgagor: Syam Peary v. Eastern Mortgage Co., Ltd. A.I.R. 1918 Cal. 557.

7. This Section 69-A closely follows Section 109 of the English Law of property Act, 1925. Its provisions are more extensive than those of the Trustees' and Mortgagees 'Powers Act, 1886, in that, firstly, a receiver may now be appointed in respect of the income generally and not merely of the rents and profits, and secondly, a receiver may now be appointed in respect of 'all' mortgages where there is an express power of sale under Section 69 and not merely in the case of English mortgages.

8. The provisions of the Trustees' and Mortgages' Powers Act, 1866, are now virtually repealed by this provision to the extent to which the provisions of this Act are applicable.* But the former Act would still apply to cases arising in provinces to which this Act does not apply and to English mortgages executed before this section was introduced. (see Gour: Law of Transfer in British India, Volume II, page 1194, Darashaw: Transfer of property Act, page 646, and Mulla: The Transfer of property Act, third edition, page 485).

9. The appointment of a receiver is dealt with in Clause (2) of Section 69-A. The receiver may be a person named in the mortgage-deed if able and willing to act, otherwise a person agreed to by the mortgagor. So also if there be no person named, on failure to agree, the mortgagee may apply to the Court and the person so appointed shall be deemed to have been appointed by the mortgagee. He is not a public officer within the meaning of Section 2(17) of Code of Civil Procedure, which includes a receiver appointed in a suit when the Court is administering an estate or property. Under this section he is merely the agent of the mortgagor: Prasaddas Sen v. K.S. Bonnerjee I.L.R. (1939) Cal. 1137, Sm. Radharani Dassya v. Purna Chandra Sarkar (1930) 34 C.W.N. 671. The mortgagor and mortgagee by agreement, or the Court, on the application of either party on due cause shown may remove a receiver. This shall be filled up in accordance with the provisions of the section. Clause 9 enacts that the provisions of these clauses are subject to modifications by the act of the parties. The receiver being the agent of the mortgagor, the latter is responsible for his acts or defaults unless (a) a deed provides otherwise, or (b) they are due to the mortgagees' improper intervention. When a receiver has been appointed, the mortgagor cannot distraint without the receiver's authority: Woolston v. Ross L.R. (1900) 1 Ch. 788. A receiver has powers (a) to demand and sue for the income in the name of the mortgagor or mortgagee; (b) to give valid receipts accordingly and (c) to exercise powers delegated by the mortgagee.

10. The provisions of Sub-section (10) are new. They give the parties the same right to apply for directions on pressing questions of management or administration as a trustee under Section 34 of the Indian Trusts Act, 1882. A receiver has no doubt a right to apply under this section.

11. The net result of this analysis is that the powers of private sale conferred on a mortgagee (a) for private sale without the intervention of Court under Section 69 and (b) for the appointment of a receiver under Section 69-A are concurrent rights. Neither section controls the other. The mortgagee acting under his power of sale possesses larger powers than any Court in execution sales. Its orders being judicial are necessarily subject to superior judicial control. But the mortgagor who executes an English mortgage knows what he is bargaining for. It is for this reason, as pointed out by Dr. Gour in his Law of Transfer in British India, Volume II, page 1194, that the Courts and Legislature have limited the execution of such mortgages to only persons belonging to certain races and restricted them to a few places of commercial importance where the summary realisation of the security free from the elaborate produre of the Court is essential for the prosecution of trade. A part from the force of habit and the conservative instinct of an Englishman to carry his own law with him, that is its sole justification which experience has not falsified, beyond suggesting a few changes in procedure now incorporated in this section, which supersedes that prescribed by Sections 6 to 19 of the Trustees and Mortgagees' Powers Act, 1866, it brings the law into line with that prescribed by the Property Act, 1925, from which, however, it has made some variations warranted by the special circumstances of this country.

12. This is also well brought out by the Special Committee's Report published in the Gazette of India, March 9th, 1929, Part V, page 62, where, after setting out the reasons for amending the Transfer of Property Act by Section 34 of Act XX of 1929, and which is now Section 6g, the Committee proceeds to point out that in all cases where the mortgagee is entitled to exercise the powers of sale under Section 6g, it was desirable to make provision for the appointment of a receiver and that for this purpose they were adopting Sections 101(3) and 109 of the English Property Act, 1925, plus certain changes desirable to be made in the circumstances obtaining in this country. They conclude:

We also think it desirable to make provision in the section on the lines of Section 34 of the Indian Trusts Act, 1882, enabling the parties or the receiver to apply in a summary proceeding to the Court for its opinion or advice or for directions in matters connected with the management or administration of the mortgaged property. (See Vinayaka Rao and Appu Rao: Transfer of Property Act, page 439-

13. In the result, the existence of a receiver under Section 69-A is no impediment to the exercise by the mortgagee of the concurrent power of sale out of Court. Therefore, leave of the Court is not necessary for sale of the property out of Court by the mortgagee even in such a case and the Court's order has got to be obtained only in regard to matters falling within the powers of the receiver relating to the management or administration of the mortgaged property. This is the settled English law and two instances will suffice. Where a mortgagee has appointed a receiver under the statute, the Court will restrain the mortgagor from distraining for rent upon a tenant of the mortgaged property such distress being illegal: Bayley v. Went (1884) 51 I.T.R. 764. Where the mortgagee and mortgagor demised to the receiver under the receivership deed, it was held that the power of sale in the mortgage deed was not affected, and that the receiver was bound, without the concurrence of the mortgagor, to join in a conveyance to a purchaser from the mortgagee under the power of sale: King v. Heepan (1853) 3 De. G. Mac. & G. 890. (See Coote's Law of Mortgages, Volume II, Chapter XLVI, page 947 and following; and for an instructive American study, Jones on Mortgages, sixth edition, Volume I; Mortgagee's Rights and Liabilities, pages 699-734, and his rights against mortgagor, pages 707-721).

14. In Fisher and Lightwood's Law of Mortgage, seventh edition, pages 313 and 314, dealing with how the remedies may be exercised contemporaneously, it is pointed out as follows:

As soon as the mortgagee has made default in payment of the mortgage debt (I)-that is, where a time for payment is fixed, by non-payment on that day; or where no time is fixed by non-payment on demand-the mortgagee is entitled to pursue any or all of his remedies against the debtor, or his assets, or the incumbered estate, subject as regards the appointment of a Receiver and the power of sale to the restrictions imposed by the mortgage deed, if the powers are conferred by that deed, or by statute, if they are statutory. And contrary to the general rule, that a person liable to be sued is not to be harassed by a multiplicity of suits, it was the right of the mortgagee, or other secured creditor, so long as any part of his debt remained unpaid, to enforce at the same time, and in different Courts, all his legal and equitable remedies. But nevertheless, after obtaining a judgment nisi for foreclosure, he cannot sell without the leave of the Court before the judgment is made absolute.

15. In the result, no leave of this Court is necessary and it is open to the mortgagee to sell the property out of Court under the powers vested in her under the mortgage deed under Section 69 of the Transfer of Property Act.

16. This application is disposed of accordingly.


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