1. Plaintiff-appellant is the assignee of the equity of redemption in the plaint lands, which were mortgaged in 1882 to the grandmother of defendants-respondents. It is respondents' case that in 1884 four items of the mortgaged property were sold orally to the mortgagees in discharge of the mortgage-debt. This case has been found to be true by the lower Appellate Court. It is also found that the alleged sale being oral is invalid, as the property is worth over Rs. 100, but as defendants and their grandmother have been in adverse possession from 1884 until date of suit in 1910, they have acquired a title by prescription. Plaintiff's suit for redemption and for accounts from defendants as mortgagees in possession has been dismissed. The appeal is pressed on three main grounds:
(1) that the plea of oral sale has been negatived and that the matter is res judicata by reason of the decision in Original Suit No. 19 of 1890 in the Peddapur District Munsif's Court,
(2) that the possession obtained by defendants' grandmother in 1884 was that of a mortgagee, and cannot, therefore, be adverse to the mortgagor, and
(3) that oral evidence of the alleged sale in 1884 is inadmissible under provision (4) of Section 92 of the Evidence Act.
2. On the first point, I do not think that appellants' plea is sustainable. In 1890, plaintiff's predecessor-in-title sued to evict defendants' grandmother, Achamma, as a trespasser on four items of the land now in suit. Achamma in defence put forward the mortgage-deed of 1882, which it is now sought to redeem, and pleaded that as the mortgagor had made default in payment, he had given up these lands to her 'as sold for the whole amount' of the mortgage-debt and Rs. 25 (twenty-five) paid by Achamma for Government dues. The mortgage-deed of 1882 contains a proviso that if the mortgagor makes default, he shall put the mortgagee in possession of the mortgaged property, and it is contended that issue No. 1 in Original Suit No. 19 of 1890, must be read in the light of the mortgage-deed. Issue No. 1 runs as follows:
Whether the plaint lands were wrongfully usurped by defendants from plaintiff's possession or were delivered over by plaintiff to first defendant in the terms of the registered mortgage-deed dated the 9th November 1882?' This issue was presumably framed on the pleadings and, therefore, 'delivered over by plaintiff in the terms of the registered mortgage-deed' must refer to defendants' allegation that on default of payment of the mortgage amount by-plaintiff, the lands were delivered to her 'as sold,' and the issue merely is as to whether plaintiff's or defendants' case is true. The plaintiff's second witness in that case admitted the existence of the mortgage and said that defendants got into possession under the mortgage and subsequently continued in possession in accordance with the decision of a panchayat. Acting upon this evidence, the District Munsif appears to have thought that defendants were in possession under the mortgage, and dismissed plaintiff's suit. The only finding on the point is that plaintiff delivered the plaint lands to defendants under 'an' arrangement and that defendants did not wrongfully usurp the plaint lands. The District Munsif also adds: 'It seems that plaintiff has no cause of action to recover until he settles the matter of the mortgage-deed'; but he does not find this as a fact. Plaintiff's suit was dismissed and defendants could not have appealed, but that does not affect the case here, for I am of opinion that the existence of the oral 'ale to defendants was not directly and substantially in issue and finally decided in that suit. There is certainly nothing in the judgment which amounts to a finding that the oral sale was untrue, and the suit was dismissed apparently because according to plaintiff's own evidence defendants were in possession, not as trespassers as alleged in the plaint, but under some arrangement under the mortgage-deed, the nature of the arrangement not being specified. The question is, therefore, not res judicata.
3. The second point raised is that Acham-ma's possession from 1884 was possession as a mortgagee and cannot, therefore, be adverse to the mortgagor. The finding of fact is that she did not get into possession as a mortgagee but as a purchaser in an invalid sale. This finding is impeached on two grounds, firstly, that the oral evidence of the sale on which it is based, is inadmissible in evidence, and secondly that when a mortgagee gets into possession during the continuance of a mortgage, his possession cannot be adverse to the mortgagor. This latter argument pre-supposes that the mortgage was continuing when possession was obtained, whereas the oral evidence is that the mortgage had been discharged. It will be better, therefore, to decide the third point, i.e., whether the oral evidence of the sale is admissible in evidence, before dealing with the points that depend upon a decision of this question. No doubt the oral sale is invalid, and evidence is inadmissible to prove it as an agreement to contradict, vary, add to, or subtract from the terms of the mortgage. (Section 92 of the Evidence Act.) Similarly under proviso 4, the existence of a distinct subsequent oral agreement to rescind or modify its terms cannot be proved. Can the sale in this case be held to be an agreement contradicting, varying, adding to, or subtracting from the terms of the mortgage or as rescinding or modifying the mortgager I think not. The effect of the agreement is to discharge the mortgage, i.e., to put an end to the contract by fulfilment, and although the oral sale accompanied by delivery of possession does not effect any legal transfer of the property, yet there is nothing in Section 92 to exclude evidence of the transaction as showing discharge of the mortgage debt. No doubt in Ariyaputhira Padayachi v. Muthuhumarsawmy 15 Ind. Cas. 343 : 23 M.L.J. 339 : (1912) M.W.N. 854 : 12 M.L.T. 425 : 37 M.P 423 it was held by Sadasiva Aiyar, J., that oral evidence of discharge by an invalid transfer was inadmissible in evidence and he goes so far as to hold that oral evidence to prove a conveyance as equivalent to payment of money, could not be allowed. In that case, the facts were very similar to the present one, i.e., the mortgagee alleged an oral sale of part of the mortgaged property in discharge of the whole mortgage; and the transaction sought to be relied upon had the effect of changing the possession of a mortgagee as such to possession as owner. But that case was a case of an usufructuary mortgage, and this I think is an important difference. Miller, J., does not discuss the admissibility of the evidence in any event in considering whether the transfer of property can be proved as showing the intention of the parties to discharge the mortgage and so, as showing change in the mortgagee's possession, to make it adverse to the mortgagor. He merely says that the intention to discharge the mortgage involves the intention to make certain transfers, and it is impossible to say that if those transfers failed, both parties nevertheless intended to discharge the mortgage. He does not hold that in no circumstance would oral evidence of the arrangement be inadmissible, and I think that in accordance with the views expressed in Ram Awatar v. Tulsi Prasad Singh 11 Ind. Cas. 713 : 14 C.L.J. 507 : 16 C.W.N. 137, Kattika Bapanamma v. Kattika Kristnamma 30 M.P 231 : 17 M.L.J. 30, Karampalli Unni Kurup v. Thekku Vittil Muthorakutti 26 M.P 195, Goseti Subba Row v. Varigonda Narasimham 27 M.P 368, such evidence is admissible for proving discharge although the sale by which the discharge was intended to be effected, is invalid. In Ram Awatar v. Tulsi Prosad Singh 11 Ind. Cas. 713 : 14 C.L.J. 507 : 16 C.W.N. 137 an oral arrangement whereby a mortgagor was put in possession of part of the mortgaged property in discharge of the liability of the usufructuary mortgagee to pay him surplus profits, was allowed to be proved by oral evidence and this in effect was allowing oral evidence of an agreement varying the terms of the mortgage to be adduced for the purpose of showing payment of money due under the terms of a registered mortgage-deed. In Kattika Bapanamma v. Kattika Kristnamma 30 M.P 231 : 17 M.L.J. 30 in a suit for arrears of maintenance defendant pleaded that, in discharge of his obligation to pay maintenance due under a registered deed, plaintiff had been put in possession of certain lands under an oral agreement. It was then held that the subsequent oral agreement being an agreement to rescind or modify the original registered agreement was not receivable in evidence, but that it was open to defendant to prove that the arrears claimed were actually discharged by the plaintiff taking possession, although the agreement to discharge cannot be proved. The other two cases, Karampalli Unni Kurup v. Thekku Vettil Muthorakutti 26 M.P 195 and Goseti Subba Row v. Varigonda Narasimham 27 M.P 368 are not so much in point, but there also evidence of an invalid oral agreement was allowed in order to prove discharge of the prior registered agreement. These rulings appear to me to be opposed to Sadasiva Iyer J.'s opinion in Ariyaputhira Padayachi v. Muthukumarasawmy 15 Ind. Cas. 343 : 23 M.L.J. 339 : (1912) M.W.N. 854 : 12 M.L.T. 425 : 37 M.K 423 that oral evidence to prove a conveyance as equivalent to payment of money cannot be allowed. This opinion was not expressed by Miller, J., in the same case and is really an obiter dictum, and I prefer to follow the principle set forth in the other four cases above, which does not seem to me to be opposed to the provisions of Section 92. In this case, then, the oral agreement is sought to be proved not as modifying the mortgage, but in order to prove fie nature of possession taken by the mortgagee and I hold that the oral evidence is admissible, and on this evidence we have the finding of fact that the mortgage-debt was discharged and that defendants' predecessor got into possession of the mortgaged properties not as mortgagee, but as owner, and that the possession as owner was adverse to the mortgagor and recognized by him to be so. Although the oral sale cannot in itself operate as an extinguishment of the mortgage, yet the proof of the payment of the mortgage-debt thereby is sufficient to prove the nature of possession by the mortgagee. In this view, I would follow the ruling reported as Uusman Khan v. Nagalla Dasanna 16 Ind. Cas. 694 : 37 M.K 545 : 12 M.L.T. 330 : 23 M.L.J. 360 : (1912) M.W.N. 995, and hold that defendants' possession has been all along adverse as against the mortgagor, and they have now acquired a title by prescription. Vide also Kone Goundan v. Bola Naicken 12 M.L.J. 387 and Venkatarayudu v. Subbamma 13 M.L.J. 302.
4. As regards the question of whether the possession from 1881 was that of Achamma or of her son-in-law Ammanna, it must be noted that defendants are sons of Ammanna and grandsons (daughter's sons) of Achamma. The learned Subordinate Judge seems to hold that Ammanna's possession was on behalf of Achamma, and although he does not record a definite finding on the point, his whole judgment proceeds on the assumption that the possession was that of Achamma. Defendants also claim under Achamma, and not from their father Ammanna. The question was only raised incidentally in second appeal and I must uphold what I take to be the Subordinate Judge's finding, i.e., that the possession, was that of Achamma.
5. Holding as I do on this question of adverse possession, it is unnecessary to discuss the further question as to whether a simple mortgagee who comes into possession of the mortgaged property during the continuance of the mortgage, can set up adverse possession notwithstanding the provisions of Section 76 of the Transfer of Property Act, a question which was also strenuously argued in this appeal.
6. I would, therefore, dismiss the appeal with costs.
7. On the first point, I consider that the appellant is not entitled to succeed by relying on the decision in Original Suit No. 19 of 1890 as being res judicata on the question of the alleged oral sale. In that suit, the appellant's predecessor-in-title set up a case of trespass in March or April 1883. Achamma, who was first defendant in that suit, and is respondents' predecessor-in-title, denied the trespass and set up a case of sale in February 1884. The District Munsif found against the trespass. This finding was sufficient for the dismissal of the plaintiff's suit for recovery of possession of immoveable property, and it was dismissed. He also found incidentally that defendants' possession was traceable to an arrangement whereby through the intervention of mediators, it was settled that the defendants should have possession under a term of the mortgage-deed which provided that, in default of the regular payment of the taxes to Government, the land should be put in possession of the mortgagee. This was nobody's case in the pleadings. It seems to have been a third version put forward for the first time at the settlement of issues and to have been established by the evidence of plaintiff's witness. As I read issue No. 1, it refers to the above-mentioned condition of the mortgage-deed, and not to first defendant's allegation that the lands were delivered to her as sold. The decretal portion of the judgment was entirely in defendants' favour, as it simply directed the dismissal of plaintiff's suit and the payment by him of the defendants' costs. There was no issue as to the alleged sale, nor was that transaction either directly affirmed or negatived. The defendant thus had no ground for appealing against the decree. Under these circumstances, I do not think it can be said that the matter was directly and substantially in issue in that suit; and, therefore, it is not res judicata, vide Secretary of State v. Swaminatha Koundan 12 Ind. Cas. 167 : 21 M.L.J. 647.
8. The second question is whether a simple mortgagee who gets into possession of immoveable property of Rs. 100 (one hundred) in value can prove an oral sale as a starting point of adverse possession against his mortgagor, so as to acquire a prescriptive title by remaining in possession for over the statutory period. This question has been answered in the negative by Miller and Sadasiva Aiyar, JJ., in the case of a usufructuary mortgagee in Ariyputhira Padayachi v. Muthuhumarasawmy 15 Ind. Cas. 343 : 23 M.L.J. 339 : (1912F) M.W.N. 854 : 12 M.L.T. 425 : 37 M.P 423,the reason being that Section 92, Clause (4), of the Evidence Act renders inadmissible oral evidence of any distinct subsequent oral agreement, rescinding or modifying a contract or disposition of property embodied in a document which has been registered according to law. The plaintiff's mortgage-deed (Exhibit A) is such a document. I am of opinion that the same answer must be given in the case of a simple mortgagee who gets into possession of the mortgaged property during the continuance of his mortgage.
9. The law casts on him the same responsibility of managing the property with prudence, of protecting his mortgagor's interests in it against interference by strangers, and of paying the surplus of the receipts accruing from the mortgaged property to the mortgagor after deducting the interest on his mortgage-money together with a fair occupation rent and all necessary expenses. (Vide Section 76 of the Transfer of Property Act). He cannot alter the legal character of his possession by his own act or assertion-so as to convert possession as mortgagee into possession as absolute owner vide Usuman Khan v. Nagalla Dasanna 16 Ind. Cas. 694 : 37 M.L 545 : 12 M.L.T. 330 : 23 M.L.J. 360 : (1912) M.W.N. 995; Although, if there is a term in the original mortgage-deed providing in a certain event that the mortgagee will hold possession as absolute owner and if the parties subsequently by their mutual conduct and admissions show that they have acted on that provision in the deed, the character of the possession will, by agreement, be altered from that date. A mortgagee's possession does not become adverse to the mortgagor merely by his styling himself as proprietor of the mortgaged property vide Ali Muhammad v. Lalta Baksh 1 A.P 655, or by the mortgagee's denial of the mortgagor's right, to redeem vide Thopara Mussad v. Collector of Malabar 10 M.P 189.
10. It has been strenuously argued that, as a discharge of a mortgage is not a rescinding of the contract, evidence could be admitted to prove that the mortgage was discharged by the oral sale. But this was not the defendants' case in their written statement, nor will it help them towards a decision in their favour; for, if the encumbrance has been discharged, the owner of the equity of redemption is entitled to recover possession of his property free of encumbrance. Mere possession coupled with an oral agreement could not be pleaded in defence against one having a legal title to recover. Vide Kurri Veera Reddi v. Kurri Bapi Reddi 29 M.P 336 : 1 M.L.T. 153 : 16 M.L.J. 395 (F.B.). Mr. Narayanamurthi conceded that he did not want to prove extinguishment of the mortgage by oral evidence, but only that his client came into possession under an oral sale which had the effect of discharging the mortgage and creating a title by prescription.
11. Of the authorities cited by him, that of Ram Awatar v. Tulsi Prosad Singh 11 Ind. Cas. 713 : 14 C.L.J. 507 : 16 C.W.N. 137 was a case in which the status of mortgagor and mortgagee between the parties was not put an end to by the transaction whereby the mortgagees came into possession. In Karampalli Unni Kurup v. Thekku Vittil Muthorakutti 26 M.P 195, the subsistence of the lease was expressly admitted by the defendants. In Kattika Bapanamma v. Kattika Kristnamma 30 M.M 231 : 17 M.L.J. 30 it was held that an oral agreement under which plaintiff was given possession of certain lands in lieu of maintenance could not be proved as a variation of the original registered instrument, but it was admissible in proof of discharge of arrears of maintenance. This only amounts to saying that the partial or complete discharge of a debt is not equivalent to a variation or rescinding of the deed by which the debt is secured. In Goseti Subba Row v. Varigonda Narasimham 27 M.M 368 it was laid down that the rescission or modification of a contract of usufructuary mortgage in a registered-deed, could only be proved by the production of an agreement of the like formality and not by an oral agreement, but it was held that some of several parties to the contract were not precluded from proving an oral agreement under Section 44 of the Contract Act to release them from personal liability, while the original contract remained unimpaired against the other joint promisors.
12. In the present instance, the defendants can only succeed by proving that the encumbrance has been extinguished in the manner described in Section 101 of the Transfer of Property Act, viz., by their becoming absolutely entitled to the property.
13. But the possession of these mortgagees was obtained under circumstances which were not incompatible with the mortgagor's interests being kept alive in the property. Their possession was capable of being referred to other causes besides a transfer of ownership, such as a temporary occupation under a condition of the mortgage-bond for the purpose of recovering from the proceeds of the land the kists paid by the mortgagees to Government, or a conversion of a simple mortgage into a usufructuary mortgage for failure to pay the instalments of the debt as agreed upon by the parties, or a submission to arbitration as stated in the prior suit. When a lawful origin can be inferred, the Courts will not assume that possession originated in an arrangement which cannot legally be proved. The possession of the mortgagees does not become adverse unless the mortgagor has reason to suppose that his rights have been invaded. Vide Ittappan v. Manavikrama 21 M. 153 : 8 M.L.J. 92 and Tarubai v. Tenkatrao 27 B. 43 : 4 Bom. L.R. 721. Proof of an oral agreement to consider the mortgage at an end is shut out by Section 92, Clause 4, of the Evidence Act. Vide Srinivasa Swami Aiyangar v. Athmarama Iyer 2 Ind. Cas. 612 : 32 M. 281 : 19 M.L.J. 280 : 5 M.L.T. 84, which follows Mayandi Chetti v. Oliver 22 M. 261 : 8 M.L.J. 196.
14. Sales and mortgages of immoveable property are both transfers of intangible rights, but one is a transfer of ownership and the other is a transfer of an interest in the property concerned. The possession of a purchaser is of a full proprietary character, while the possession of a mortgagee in possession is of a limited nature. Both transactions are required to be registered, if the property is Rs. 100 in value or over. An extinguishment of a mortgage by the mortgagee's rights being merged in those of an owner involves an alteration of the relationship of mortgagor and mortgagee into one of seller and purchaser. When each of these transactions requires a registered document to make it valid, the law does not permit the substitution of one for the other to be effected in a less formal manner.
15. I am, therefore, of opinion that this appeal should be allowed and the suit remanded for taking an account of the profits derived from the said lands and in respect of the mortgage-debt. The Subordinate Judge's finding as to the value of items Nos. 2 to 6, which defendants allege to have been sold, is only that a sale of them 'without a registered-deed might not be valid,' the allegation in the written statement being that they were not worth more than Rs. 70-8. It is, however, unnecessary to call for a finding on this point as it is sufficient for the purpose of Section 92, Clause (4), of the Evidence Act that Exhibit A has been registered.
16. The Subordinate Judge has not decided the second issue which related to the possession of Ammanna, who was son-in-law of Achamma and 2nd defendant in Original Suit No. 19 of 1890, but he incidentally observes that Ammanna was managing the affairs of Achamma. The District Munsif found that the possession of Ammanna for over 12 years prior to suit was adverse to both parties and barred the suit. Ammanna is not a party to these proceedings. If his possession was adverse to both parties, the defendants clearly could not take advantage of it and use it as a defence in a suit for redemption brought against them as mortgagees in possession.
17. As my learned brother considers that the lower Court's judgment should be confirmed, the appeal is dismissed with costs.