Mritunjoy Pani & ANR Vs. Narmanda
Bala Sasmal & ANR [1961] INSC 96 (14 March 1961)
SUBBARAO, K.
DAYAL, RAGHUBAR
CITATION: 1961 AIR 1353 1962 SCR (1) 290
ACT:
Mortgage--Right of redemption--Suit, when
maintainable--Mortgagor and Mortgagee--Legal position--Indian Trusts Act, 1882
(II of 1882), S. 90.
HEADNOTE:
Usufructuary mortgage bond was executed in
favour of the father of the appellant who was put in possession of the
mortgaged property. One of the terms of the usufructuary mortgage was that in
case of failure of payment of rent by the mortgagor, the mortgagee was to pay
off the arrears of rent to the landlord, which obligation the mortgagee did not
honour as a result of which the property was brought to sale and ultimately
purchased by the mortgagee.
The mortgagor filed a suit against the
mortgagee, the appellant's father, for redemption of the mortgage and !or
possession., The defence inter alia was that the mortgagee had purchased equity
of redemption in execution of the rent decree and that the mortgagor had no
longer any right to sue him for redemption and their remedy, if any, was to sue
for setting aside the sale on the ground of fraud or otherwise.
Held, that s. go of the Trusts Act read with
the illustration (c) lays down the principle that no one can be allowed to
benefit for his own wrongful act.
Held, further, that the legal position with
regard to mortgagor and mortgagee was that:(1) the governing principle is that
"once mortgagee 291 always a mortgagee" till the mortgage is
terminated by the act of the parties themselves, by merger or by order of the
Court;
(2)where a mortgagee purchases the equity of
redemption in execution of his mortgage decree with the leave of court or in
execution of a mortgage or money decree obtained by a third party, the equity
of redemption may be extinguished;
and, in that event, the mortgagor cannot sue
for redemption without getting the sale set aside; and (3)where a mortgagee
purchases the mortgaged property by reason of a default committed by him the
mortgage is not extinguished and the relationship of Mortgagor and mortgagee
continues to subsist even thereafter, for his purchase of the equity of
redemption is only in trust for the mortgagor.
In the instant case the right to redeem the
mortgage was not extinguished and in the eyes of law, the purchase in the rent
sale was deemed to have been made in trust for the mortgagor and the suit for
redemption was maintainable.
Sidhakamal Nayan v. Bira Naik, A.I.R. 1954
S.C. 336, relied on. Malkarjun Bin Shidramappa Pasare v. Narhari Bin Shivappa,
(1900) L.R. 27 I.A. 216, distinguished.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 119 of 1957.
Appeal by special leave from the judgment and
decree dated March 3, 1955, of the Orissa High Court in Appeal No. 593 of 1950.
B. Patnaik, for the appellants.
D. N. Mukherjee, for the respondents.
1961. March 14. The Judgment of the Court was
delivered by SUBBA RAO, J.-This is an appeal by special leave against the
judgment of the High Court of Judicature for Orissa dated March 3, 1955, setting aside the judgment of the Court of the District Judge, Mayurbhanj, and
restoring that of the Subordinate Judge, Baladore.
The facts leading up to this appeal may be
briefly stated.
The land in dispute originally belonged to
one Bhagaban Parida. On July 16, 1924, he executed a registered kabala'for a'
consideration of Rs. 2,000 in favour of one Priyanath Sasmal. On June 2, 1928, Priyanath Sasmal executed a usufructuary mortgage bond (Ex. B) for Rs. 1,500
in favour of 292 Lakshminarayan Pani, the father of the appellants herein.
Under the terms of the said usufructuary
mortgage, the mortgaged property was put in possession of the mortgagee.
One of the terms of the mortgage deed was
that the initial responsibility for the payment of rent was that of the
mortgagor and that, if for any reason he did not pay the arrears of rent, the
mortgagee was under an obligation to pay off the arrears to the landlord and to
obtain a receipt acknowledging the payment. The mortgagee did not pay the
arrears of rent, with the result that for arrears of rent the said property was
brought to sale and ultimately purchased by the mortgagee for a sum of Rs. 300
on September 22, 1936. The sale was confirmed on November 4, 1936, and the mortgagee took possession through Court on December 21, 1938. The mortgagor filed a suit against the mortgagee in the Court of the Subordinate Judge, Balasore, for
redemption of the mortgage and for possession. As the mortgagor died after the
filing of the suit, his widow and son were brought on record as his legal
representatives. The defence of the appellants to that suit was that possession
was not delivered to their father, the mortgagee, under the terms of the
mortgage deed, that the debt was discharged, that their father had purchased
the equity of redemption in execution of the rent decree, and that the
mortgagor had no longer any right to sue him for redemption. The learned
Subordinate Judge and, on appeal, the District Judge concurrently found that in
fact possession was delivered to the mortgagee on the basis of the mortgage
deed and that the plea of discharge was not true; but, while the trial court
held that after the purchase of the property by the mortgagee in execution of
the decree for rent he was holding the, property only on behalf of the
mortgagor, the appellate court came to the conclusion that after the said
purchase the relationship of mortgagor and mortgagee came to an end;
with the result the trial court decreed the
suit and the appellate court, setting aside that decree, dismissed the suit.
The legal representatives of the mortgagor preferred a second appeal to the
High Court against the judgment and 293 decree of the District Judge. A
division bench of the High Court agreed with the conclusion of the trial court,
set aside the decree of the District Court and restored that of the trial
court. Hence the present appeal.
Learned counsel for the appellants i.e., the
legal representatives of the mortgagee, contended that in execution of the rent
decree the mortgagee became the purchaser of the equity of redemption, with the
result that the relationship of mortagor and mortgagee ceased to exist and,
therefore, the respondents could not sue for redemption and their remedy, if
any, was to sue for setting aside the sale on the ground of fraud or otherwise.
On the other hand, learned counsel for the
respondents contended that, as the sale was the result of manifest dereliction
of duty imposed upon the mortgagee by the terms of the transaction, the
purchase by the mortgagee would only be in trust for the mortgagor and,
therefore, the suit for redemption was maintainable.
To appreciate the rival contentions it is
necessary to notice briefly the law on the subject. The relevant section governing
the facts of the case is s. 90 of the Indian Trusts Act, 1882 (2 of 1882). The
material portion of the section reads, "Where a mortgagee by availing himself
of his position as such, gains an advantage in derogation of the rights of the
other persons interested in the property he must hold, for the benefit of all
persons so interested, the advantage so gained, but subject to the repayment by
such persons of their due share of the expenses properly incurred, and to an
indemnity by the same persons against liabilities properly contracted, in
gaining such advantage." Illustration (c) to that section says, "A
mortgages land to B, who enters into possession. B allows the Government
revenue to fall into arrears with a View to the land being put up for sale and
his becoming himself the purchaser of it. The land is accordingly sold to B.
Subject to the 294 repayment of the amount due on the mortgage and of his
expenses properly incurred as mortgagee, B holds the land for the benefit of
A." The following three conditions shall be satisfied before s. 90 of the Indian
Trusts Act can be applied to a case: (1) the mortgagee shall avail himself of
his position as mortgagee; (2) he shall gain an advantage; and (3) the gaining
should be in derogation of the right of the other persons interested in the
property. The section, read with illustration (c), clearly lays down that where
an obligation is cast on the mortgagee and in breach of the said obligation he
purchases the property for himself, he stands in a fiduciary relations ship in
respect of the property so purchased for the benefit of the owner of the
property.
This is only another illustration of the well
settled principle that a trustee ought not to be permitted to make a profit out
of the trust. The same principle is comprised in the latin maxim commodum ex
injuria sua nemo habere debet, that is convenience cannot accrue to a party
from his own wrong. To put it in other words, no one can be allowed to benefit
from his own wrongful act. This Court had occasion to deal with a similar
problem in Sidhakamal Nayan v. Bira Naik (1). There, as here, a mortgagee in
possession of a tenant's interest purchased the said interest in execution of a
decree for arrears of rent obtained by the landlord.
It was contended there, as it is contended
here, that the defendant, being a mortgagee in possession, was bound to pay the
rent and so cannot take advantage of his own default and deprive the mortgagors
of their interest. Bose, J., speaking for the Court, observed at p. 337 thus:
"The position, in our opinion, is very
clear and in the absence of any special statutory provision to the contrary is
governed by s.
90, Trusts Act. The defendant is a mortgagee
and, apart from special statutes, the only way in which a mortgage can be
terminated as between the parties to it is by the act of the parties
themselves, by merger or by an order of the Court. The maxim "once a
mortgage always (1) A.I.R. 1954 S.C. 336.
295 a mortgage" applies. Therefore, when
the defendant entered upon possession he was there as a mortgagee and being a
mortgagee the plaintiffs have a right to redeem unless there is either a
contract between the parties or a merger or a special statute to debar
them." These observations must have been made on the assumption that it
was the duty of the mortgagee to pay the rent and that he made a default in
doing so and brought about the auction sale of the holding which ended in the
purchase by him. The reference to s. 90 of the Indian Trusts Act supports this
assumption.
Learned counsel for the appellants relied
upon the decision of the Judicial Committee in Malkarjun Bin Shidramappa Padare
v. Narhari Bin Shivappa (1) in support of his contention that a mortgagor
cannot seek the relief of redemption without first getting the sale set aside.
There, a mortgaged property was sold in execution of a decree against the
mortgagor and the plaintiff neglected or refused to pray that it might be set
aside. The Judicial Committee held that an execution sale could not be treated
as a nullity if the court which sold it had jurisdiction to do so; and it could
not be set aside as irregular without an issue raised for that purpose and
investigation made with the judgment creditor as a party thereto. That was not
a case where the mortgagee who had an obligation to discharge under the
mortgage deed made a default with the result the property was sold and purchased
by the mortgagee himself.
The proposition enunciated by the Judicial
Committee would apply to a case where the equity of redemption was extinguished
by the court sale. This may apply to a case, where the mortgagee, after
obtaining leave to bid., purchases at a sale in execution of his decree or a
decree obtained by a third party. In such a case there may be scope for the
argument that the equity of redemption is extinguished and, therefore, the
mortgagor cannot get relief till the sale is set aside in the manner known to
law. But when the sale is (1) (1900) L.R. 27 I.A. 216.
296 brought about by the default of the
mortgagee, the mortgage is not extinguished and the relationship of mortgagor
and mortgagee continues to exist and, therefore, there will not be any
necessity for setting aside the sale.
The legal position may be stated thus: (1)
The governing principle is "once a mortgage always a mortgage" till
the mortgage is terminated by the act of the parties themselves, by merger or
by order of the court. (2) Where a mortgagee purchases the equity of redemption
in execution of his mortgage decree with the leave of court or in execution of
a mortgage or money decree obtained by a third party, the equity of redemption
may be extinguished; and, in that event, the mortgagor cannot sue for
redemption without getting the sale set aside. (3) Where a mortgagee purchases
the mortgaged property by reason of a default committed by him the mortgage is
not extinguished and the relationship of mortgagor and mortgagee continues to
subsist even thereafter, for his purchase of the equity of redemption is only
in trust for the mortgagor.
Let us now apply the aforesaid principles to
the concurrent findings arrived at by the courts below. All the courts
concurrently found that in fact possession was delivered to the mortgagee on
the basis of the mortgage deed, Ex. B. They have also found that the plea of
discharge taken by the appellants was not true. The High Court found that under
the mortgage deed the mortgagee had a duty to pay the arrears of rent to the
landlord, but he made a default in paying the said arrears. The High Court
farther held that the sale was the result of manifest dereliction of the duty
imposed upon the mortgagee by the very terms of the transaction. The said
findings clearly attract the provisions of s. 90 of the Indian Trusts Act. In
view of the aforesaid principles, the right to redeem the mortgage is not
extinguished and in the eye of law the purchase in the rent sale must be deemed
to have been made in trust for the mortgagor. In the promises, the High Court
was right in holding that the suit for redemption was maintainable.
297 No other point was raised before us. The
appeal fails and is dismissed with costs.
Appeal dismissed.
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