R. Santhankumar Nadar Vs. Indian Bank
Ltd., Madras & Ors [1967] INSC 31 (6 February 1967)
06/02/1967 MITTER, G.K.
MITTER, G.K.
SHAH, J.C.
CITATION: 1967 AIR 1296 1967 SCR (2) 613
ACT:
Transfer of Property Act (4 of 1882),, ss, 51
and 69- Applicabiltly of s. 51 to purchaser of mortgaged property with
knowledge of mortgage Notice to assignee of exercise of right of sale under s.
69-If necessary.
HEADNOTE:
A mortgage was created over property situate
in the City of Madras and the mortgage-deed conferred on the mortgage the power
under S. 69 of the Trinsfer of Property Act, to sell the property without the
intervention of the Court.
Thereafter, the appellant purchased a small
portion of the property from the mortgagors. The sale-deed provided that the mortgagors
(vendors) should get the property sold released from the mortgage within one
year, that in default thereof the. appellant (vendee) would be at liberty to
enforce his to compel the vendors to do so, and that the vendors should intern for
all expenses and damages;
but, no such steps were 1the vendors or the
vendee.
After the appellant's purchase, a notice was
issued on behalf of the mortgage, to the mortgagors, in terms of the mortgage
deed, as required by s. 69(2), but no notice was serve on the appellant. The
property mortgaged was then widely advertised for sale and was bought by the
first respondent bank. The bank then filed the suit for v possession, mesne
profits and other reliefs. The appellant contended that : (1) the sale was
invalid and not binding on his portion in-the absence of notice to him, and (2)
as a bona tide purchaser he was entitle ad, under s. 51 of the Act, to the
value of improvements effected by him The High Court rejected the contentions
and decreed the suit..
In appeal to this Court,
HELD : (1) Section 69(2) lays down that the
notice requiring payment of the mortgage money may be given to the mortgagor or
to one of several mortgagors, where there are more than one. In the present
case, the mortem had not parted with their entire interest in the property, and
the appellant stood am the shoes of the mortgagors with respect to the portion
purchased by him. Therefore, notice having been issued to the mortgagors the
appellant was not entitled to such notice. Since he knew of the Power of sale
contained in the mortgage deed and there was. no fraud or collusion-in the sale
of the property to the bank, the appellant had no cause for complaint. [615
E-F; 61-6 G] Muncherji Furdoonji Mehta v. Noor Mahomedbhoy Jairaibhoy Pirbhoy,
I.L.R. 17 Bom. 711 and Hoole v. Snuth, 17 Ch. D. 434, explained.
(2)Section 51 of the Act has no application
to the appellant at all as, in the circumstances of the case, he could not have
believed that he was absolutely entitled to the, property [617 E]
CIVIL APPELLATE Jurisdiction : Civil Appeal
No 505 of 1965.
Appeal by special leave from the judgment and
decree dated March 11, 1964 of the Madras High Court in Original Side Appeal
No. 11 of 1960.
614 R. Thiagaraian and R. Ganapathy Iyer, for
the appellant.
M. S. K. Sastri and M. S. Narasimhah, for
respondent No. 1 The Judgment of the Court was delivered by Miter, J. This is
an appeal from a judgment and decree of the High Court of Judicature at Madras
on special leave granted by this Court.
The owners of the property situate in the
City of Madras created a mortgage over it in 1944 in favour of one Jagmohan
Prasad Bhatta with power to him to sell the mortgaged property without the
intervention of the Court. On April 22, 1950 the appellant before us purchased
a small portion of the property from the mortgagors, the vendors covenanting to
get the property mentioned in the schedule to the document released from the
mortgages mentioned within a period of one year, in default whereof the vendee
was to be at liberty to enforce his rights to compel the vendors to do so in
appropriate proceedings and the vendors agreed to indemnify the purchaser for
all such expenses and- damages.
The original mortgagee died on March 14, 1950
leaving a will and bequeathing the entire property in equal shares to several
persons. The executor to the will of the deceased executed a deed of transfer
in favour of the said legatees on May 14, 1951. The legatees executed a general
power of attorney in favour of one Gangadhar Bhatta, the 8th defendant,
conferring on him all powers including the power, to realise the amounts due
under the mortgage dated September 21, 1944 and to take other necessary steps.
On May 28, 1952 a notice was issued in terms of the mortgage deed under s. 69
of the Transfer of Property Act. There is no dispute that it was not served on
the appellant. The sale was widely advertised and was adjourned from time to
time till April 26, 1953 when the property was purchased by the 1st respondent,
the Indian Bank Ltd., for a sum of Rs.
1,12,500. The sale-deed in favour of the bank
was executed on July 4, 1953. The bank filed a suit on April 26, 1954 praying
for vacant possession of portions of the property, decree for mesne profits
against some of the defendants and other reliefs. Before the learned single
Judge of the Madras High Court who heard the suit, it was contended on behalf
of the present appellant that the sale was invalid in the absence of notice
thereof to him. The learned Judge turned down the contention that the sale was
fraudulent as alleged by the appellant. He also rejected the contention put
forward on behalf of the appellant that he was a bona fide purchaser within the
meaning of s. 51 of the Transfer of Property Act and as such entitled to the
improvements effected by him, namely, the cost of erecting the structures he
had put up thereon. The appellant filed an appeal before the High Court of
Madras alleging identical grounds in appeal. After losing in the High Court,
the appellant applied for special leave to this Court which was granted raising
six grounds. in his 615 petition. By his statement of case filed in this court,
the 'appellant sought to contend that the provisions of s.
69 of the Transfer of Property Act allowing
the exercise of the power of sale after notice to any one of the mortgagors
offended Arts. 19 and 14 of the Constitution and as such were liable to be
struck down. In paragraph 2 of his written statement he had raised the plea
that the power of sale in terms of s. 69 of the Transfer of Property Act was
ultra vires the Constitution of India as being discriminatory and opposed to
the fundamental rights of citizens. Apparently the plea was abandoned at the
hearing because no issue was raised thereon at the trial of the suit or in
appeal to the Division Bench. We indicated that we could not allow the
appellant to urge this plea at this stage.
The point that the sale under the provisions
of the mortgage deed was invalid because of want of notice to the 16th
defendant is not one of substance. Section 69 subs. (1) gives a mortgagee or
any person acting on his behalf the power to sell or concur in selling the
mortgaged property or-any part thereof in default of payment of the mortgage
money, without the intervention of the court in the cases specified in sub-cls.
(a), (b) and (c) of that sub- section. Sub-s. (2) of s. 69 lays down inter alia
that no such power shall be exercised unless and until notice in writing
requiring payment of the principal money has been served on the mortgagor, or
on one of several mortgagors and default has been made in payment of the
principal money or of part thereof, for three months after such service. The
language of this sub-section is clear and unambiguous. The section lays down in
no uncertain terms that the requisite notice may be given to the mortgagor or
one of several mortgagors where there is a number of them, the obvious idea
being that the mortgagor who is given the notice is constituted the agent of
the other mortgagors to receive the same. It may be hard on a person in the
position of a mortgagor to get no notice under this section if he comes to
learn that the property has been sold without any notice to him. But if there
has been no fraud or collusion in the matter, he has no cause for complaint.
Our attention was however drawn to a decision of the Bombay High Court in
Muncherji Furdoonji Mehta V. Noor Mahomedbhoy Jairabjhoy Pirbhoy(1) and it was
contended on the strength thereof that an assignee from a mortgagor must be
served with a notice of sale if he is to be bound thereby. The facts there were
as follows. The defendants in the suit before the Bombay High Court were the
first mortgagees. The plaintiffs were puisne mortgagees of the property. The
property had been advertised for sale by the defendants several times before
the plaintiffs took any step in the matter. In April 1893, the defendants
advertised the mortgaged property for sale and the plaintiffi filed a suit and
obtained a rule nisi with an interim injunction restraining the defendants (1)
I.L.R. 17 Bombay 711, 715.
from proceeding with the sale. It was
contended on behalf of the plaintiffs that the defendants had no power to sell
at all because the mortgage deed provided that notice should be given to the
mortgagors or their assigns and-the defendants had not given notice to the
plaintiffs who were assigns of the equity of redemption. It was however found
that the defendants had given a notice of sale to the mortgagors on August 31,
1891 three days before the plain- tiffs had any interest in the equity of
redemption and Starling, J. who decided the case observed.
"........ as that appears to me to be a
proper notice, I do not think that any further notice would be required to be
given to any person who at that time was not an assign, in order to enable the
defendants to sell under that notice; because I am of opinion that an assign
must take things in the state in which he finds them, and cannot claim to alter
rights which have accrued before he has any authority to interfere."
Commenting on this case, the learned commentators of Mulla's Transfer of
Property Act (Fifth Edition) at page 500 state "If the mortgagor has
transferred his interest, either to a purchaser or to a subsequent mortgagee,
and the mortagee is aware of it, he should give notice to the transferee; but
It not if the transfer has taken place after the mortgagee has already given
notice to the mortgagor." Learned counsel appearing on behalf of the
appellant wanted to press this observation into service by saying that as his
client had purchased a portion of the property by a registered deed two years
prior to the notice of sale it was incumbent on the mortgagoe to give him a
notice. This contention cannot be accepted. It will. be noticed that in the
Bombay case there was no reference to s. 69 of the Transfer of Property Act or
the powers of the mortgagee there under. Moreover, the mortgage deed in that
case expressly provided for notice being given to the mortgagors or their
assigns. In the present-case, the mortgagors had not parted with their entire
interest in the property. At best the appellant stood in the shoes of the
mottgagors with respect to a portion of the property. He knew IL of the power
of sale contained in the mortgage deed and that is why he wanted to- safeguard
himself against such sale by insertion of a, clause for indemnity.
The English decision in Hoole v. Smith(1)
referred to in the above Bombay judgment does not help the appellant before us.
in that case the mortgage deed provided that
the power of sale was not to be exercised unless and until notice had been
given in writing to (1) 17 Ch. D. 434.
617 the mortgagor, his executors,
administrators or assigns to pay off the moneys for the time being due and
owing on the said indenture of mortgage. Fry, J. observed in that case :
"When I find the word 'assigns' used in
the power of sale as an alternative for Harrison, it is impossible that I can
hold that it was sufficient for the defendants to go on serving Harrison alone
after he had assigned his equity of redemption. The object of the proviso was
that any assign might be at liberty to intervene and pay off the mortgage, and
no one could be more interested than the second mortgagee in this right of
intervention." The only other point raised on behalf of the appellant was
that he was entitled to the value of the improvements effected by him on the
portion of the property purchased under the provisions of s, 51 of the Transfer
of Property Act. In our opinion, that section can have no manner of application
to the facts of this case. Under that section, a transferee of immovable
property making any improvement therein, believing in good With that he is
absolutely entitled thereto, has a right to require the person sub sequaintly
evicting him therefrom on the strength of a better title, to have the value of
the improvement estimated and paid or secured to him or to purchase his
interest in the property at the then market value thereof. In this case, there
can be no question of the appellant that he was absolutely entitled to the
property. He know that he was purchasing a small portion of it and that his
vendors stood to lose the property unless the paid up the mortgage money on
receipt of notice from the mortgagee. As already mentioned, the appellant
wanted to safeguard himself against such an eventuality by the insertion of a
clause in his deed of sale and the court directed the setting apart of Rs. 9,000
from out of the sale proceeds for the purpose. We do not think that,the case
referred to by the Mined counsel Narayana Rao v. Basavaeaydppa(1) has Viny
application to the facts of this case.
We would therefore dismiss the appeal with
costs.
V.P.S Appeal dismissed..
(1) A.I.R. 1956 S.C. 727.
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