Narandas Karsondas Vs. S.A. Kamtam
& ANR  INSC 315 (7 December 1976)
RAY, A.N. (CJ) RAY, A.N. (CJ) BEG, M.
HAMEEDULLAH SINGH, JASWANT
CITATION: 1977 AIR 774 1977 SCR (2) 341 1977
SCC (3) 247
CITATOR INFO :
RF 1980 SC1334 (6)
Transfer of Property Act 1882 Sec. 5, 54 and
69__Meaning of transfer-Sale--Power of sale without intervention of
Court--Whether extinguishes the right Of redemption---Indian Registration Act
1908.Sec. 17--Whether equity of redemption can be lost without execution of a
registered document--Indian Con-tract Act 1872--Sec. 202--Power coupled with
interest--Whether can be revoked-After power is acted upon--Law of Property Act
1925.--Sec. 100(1)(/)-Distinction between legal and equitable estate under
English Law--Position under Indian law.
In 1964, respondent No. 1 Society was
registered as a Housing Society. The Society wanted 12 plots to be constructed
for its 12 members. The Society, therefore, purchased a plot of land. In 1966,
the Society mortgaged the land and the incomplete structure in favour of
respondent No. 2. In March, 1971, the Special Liquidator of the Society was
appointed under s. 102 of the Maharashtra Cooperative Societies Act, 1960. The
mortgagee after demanding the dues from the mortgagor advertised the public auction
for the sale of the property. In the auction sale the appellant was declared as
the highest bidder. The auction purchaser took the possession of the land and
the incomplete structure.
Society filed a dispute before the Officer on
Special Duty under the Maharashtra Co-operative Societies Act against the
auction purchaser and the mortgagee praying for an injunction against the
completion of the sale. The Society in the meanwhile paid the mortgage money to
the mortgagee. The Officer on Special Duty delivered his judgment in January
1975 and held that the Society was entitled to redeem the property because the
conveyance was not complete. The appellant filed an appeal before the
Maharashtra State Co-operative Appellate Court. In the appeal, plaint was
allowed to be amended and a prayer for redemption was allowed to be introduced.
The appellate Court held that there was no complete sale within the meaning of
section 69(3) of the Transfer of Property Act 1882 and the equity of redemption
was, therefore, not lost and that the auction price was grossly inadequate and
that the sale was not after a fair competition. One of the conditions of
auction sale was that if the mortgagor deposited the mortgage money in court
between the date of the sale and completion thereof and if as a result thereof
the mortgagee was to reconvey the property to the mortgagor the auction
purchaser Would be entitled to the refund of the amount paid without any interest
In an appeal by Special Leave the appellant
(1) When under s. 69 of the Transfer of
Property Act a mortgagor confers on the mortgagee a power of sale through court
or without intervention of court, the power of sale extends to the entire legal
estate of the mortgagor.
(2) When such a power is conferred it is
agency coupled with interest under s. 202 of the Indian Contract Act 1872.
If the power is acted upon revocation even on
payment of mortgage money cannot nullify acts already done pursuant to the said
(3) Knocking down at an auction sale by the
mortgagee pursuant. to the power of sale extinguishes the mortgagor's right of
(4) In a suit for specific performance by
auction purchaser, the purchaser will be entitled to specific performance
because it is a sale by mortgagor.
Dismissing the appeal, 342
HELD: (1) Under section 69(1)(c) a mortgagee
has power to sell without intervention of the court where power is conferred by
the mortgage deed and the mortgaged property or any part thereof was on the
date of the execution of the mortgage deed situated in certain big towns.
[347D-E] (2) In India the word "transfer" is defined with reference
to the word ,"convey". The word "transfer" in English law
in its narrower and more usual sense refers to the transfer of an estate in
the,land. Section 205 of the Law of Property Act in England defines
"conveyance as including mortgage, charge, lease, assent vesting declaration,
vesting instrument". The word "conveys" in section 5 of the Transfer
of Property Act and s. 17 of the Indian Registration Act is that contract for
sale in respect of immovable property of the value of more than Rs.100 without
registration cannot extinguish the equity of redemption. In India it is only on
execution of the conveyance and registration of transfer of the mortgagor's
interest by registered instrument that mortgagors right of redemption will be
extinguished. The conferment of power to sell without intervention of the Court
in a mortgage deed by itself will not derrive the mortgagor of his right to
redemption. The extinction of the right of redemption has to be subsequent to
the deed conferring such power. The right of redemption is not extinguished at
the expiry of the period. The equity of redemption is not extinguished by mere
contract for sale. [348B, D-E] Abraham Ezra Issac Mansoor v. Abdul Latif Usman
1944 Bombay 549, approved.
Meenakshi Velu & Ors. v. Kasturi
Sakunthala & Ors.
I.L.R. (1967) 3 Mad. 161, overruled.
Ellappa Naiker and Ors. v. Sivasubramania
Manisaran (1936) 71 Madras Law Journal 607, approved.
(3) Under the English doctrine, a contract of
sale transfers an equitable estate to the purchaser. In India there is no
equity or right in property accrued is favour of the purchaser by the contract
between the mortgagee and the proposed purchaser. In India there is no
distinction between legal and equitable estates. In India there can be but one
owner i.e. legal owner. [347G-H] Rani Chhotra Kumari v. Mohan Bikram (1931) 58
I.A. 279 and Rambaran Prasad v. Ram Mohit Hazra & Ors. (1967) I SCR 293,
(4) Under s. 100(1)(i) of the Law of Property
Act, 1925, if a mortgagee exercises power to sell the mortgaged property by
public auction or by private contract it is binding on the mortgagor before
completion of the sale unless it is proved that the power was exercised in bad
faith. The English decisions are based on the said provision of the English Law
of Property ,Act and, therefore, they are not applicable to India. [346 B-D]
Waring (Lord) v. London and Manchester Assurance Co.
(1935) Chancery 310 and Property &
Bloodstock Ltd. v. Emerton (1968) L.R. Chancery 94 distinguished.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1020 of 1975.
(Appeal by Special Leave from the Judgment
and Order dated the 18-4-1975 of the Maharashtra State Co-op. Appellate Court
in Appeal No. 54 of 1975.) J. L. Nain, U. R. Lalit, and V. N. Ganpure, for the
V.M. Tarkunde, Sharad Manohar, P.H. Parekh
and Miss Manju Jetley, for respondent No. 1.
M.C. Bhandare, Mrs. S. Bhandare, N.S.
Narasimhan, K.C. Sharma, ,A. K. Mathur and ,4. K. Sharma, for respondent No. 2.
343 The Judgment of the Court was delivered
by RAY, C.J. This appeal by special leave is from the judgment dated 18 April
1975 of the Maharashtra State Cooperative Appellate Court.
The question for consideration in this appeal
is whether a mortgagor can exercise his right of redemption after a mortgagee
under an English Mortgage with power to sell mortgaged property without the
intervention of the court gives notice to the mortgagor to sell the mortgaged
property by public auction and sells it by public auction.
The appellant is the auction purchaser. The
respondents are Flora Co-operative Housing Society in liquidation the
mortgagors (hereinafter referred to as the Society) and the Maharashtra
Co-operative Housing Finance Society Ltd., the mortgagee (hereinafter referred
to as the mortgagee).
In 1964 the Society was registered as a
Housing Society with 12 members. The paid up capital of the Society was
Rs.21,000/-. The Society wanted 12 flats to be constructed in one structure of
ground and two upper floors. The Society purchased plot No. 153 in Santa Cruz
at Bombay, measuring 1002 sq. yards. The price was Rs.1,02,000/-.
In 1966 the Society mortgaged the land and
the incomplete structure in favour of the mortgagee. The mortgage was for the
sum of Rs.70,000/-. It was an English mortgage. In 1968 the mortgagee advanced
a further sum of Rs.42,000/-.
In 1966 Fair Deal Builders entered into a
contract with Society to build. The work was stopped. Thereafter in 1967 the
Society entrusted the work to Maharaja Builders. In 1968 the contract with
Maharaja Builders was terminated.
The work was given in 1969 to Kamal
Construction Company, who abandoned it in incomplete stage.
On diverse dates between 29 August 1967 and
29 November 1970, notice was given by the mortgagee to the Society for non-payment
to the mortgagor and to sell the property by public auction.
On 9 March 1971 the Assistant Registrar of
Co-operative Societies, Maharashtra, appointed a Special Liquidator of the
Society under section 102 of Maharashtra Co-operative Societies Act, 1960. The
Assistant Registrar communicated the order of appointment liquidator to the
mortgagee on 22 April 1971. The order of appointment of a liquidator was
published in Maharashtra Government Gazette on 29 April 1971.
The mortgagee advertised through Government auctioneer
for public auction of the property. The public auction was held on 14 April
1971. The claim was for Rs.1,22,888.22 paise. The appellant was declared the
highest bidder for Rs.1,31,001/-. The terms of sale inter alia were that 25 per
cent was to be paid in advance and the balance in 30 days. The sum of
Rs.33,000/was paid as 6--1546SCI/76 344 25 per cent advance and the balance
purchase price of Rs.98,001/was paid to attorneys of the mortgagee. The auction
purchaser took possession on 17 April 1971.
On 13 August 1971 the Society filed a dispute
before the Officer on Special Duty under the Maharashtra Co-operative Societies
Act against the auction purchaser and the mortgagee for injunction against
completing sale. The Society obtained an ex-parte injunction restraining
transfer. On 29 September 1971, the interim injunction was vacated.
Thereafter the Society filed an appeal
against the said order before the Appellate Tribunal.
In the meantime the appellant filed a writ
petition in the Bombay High Court under Article 227 of the Constitution.
On 16 June 1972 there was an interim order by
the High Court in the writ petition. The Society undertook not to dispose of
property until disposal of dispute. Both parties were allowed to keep watchmen.
The Society borrowed a sum of Rs.1,31,000/and
paid the same to the mortgagee on 15 October 1972.
On 16 January 1975 the Officer on Special
Duty delivered judgment. He held that the dispute was maintainable under
section 91 of the Maharashtra Co-operative Societies Act. The Society was held
not competent to challenge the auction sale held on 14 April 1971. It was also
held that the validity of auction was not affected. The mortgagee was held
entitled to exercise power of sale as a secured creditor without being affected
by the winding up order against the Society. It was also held that the
mortgagee did' not commit any breach of the statutory provisions of section 69
of the Transfer of Property Act. The sale was pot vitiated. It was found that
there was no irregularity at the auction and there is no ground for setting
aside the-sale. The society was entitled to redeem the property because the
conveyance was not complete.
The auction purchaser filed before the
Maharashtra State Cooperative Appellate Court an appeal against the said order.
In appeal the plaint was allowed to be amended and prayer for redemption was
allowed to be introduced.
On 18 April 1975 the Maharashtra State
Cooperative Appellate Court dismissed the appeal and held that the dispute as
initiated by the Society fell within the ambit of section 97 of the Maharashtra
Cooperative Societies Act. The Appellate Court further held that there was no
complete sale within the meaning of section 69(3) of the Transfer of Property
Act and the equity of redemption was therefore not lost. It was further held
that the auction price was grossly inadequate. The auction sale was not a sale
after a fair competition.
The Mortgage Deed provided inter alia as
follows :-345 "it is hereby agreed and declared that it shall be lawful
for the mortgagees at any time without any further consent on the part of the
mortgagors to sell the said mortgaged premises ........ The aforesaid power
shall be deemed to be a power to sell or concur in selling the said mortgaged
premises in default of payment of the mortgage money without the intervention
of the court within the meaning of section 69 of the Transfer of Property Act."
Clauses (7), (8) and (33) in the Conditions of Sale may be referred to.
Clause (7) provided as follows. Upon payment
of the balance Of the purchase price, the purchaser shall be entitled to a
conveyance from the vendors. The vendors shall in the conveyance of the
property purchased by purchaser give the usual covenant required of a limited
owner against encumbrances. The vendors shall give no other covenant required
of an absolute of full owner. The vendors shall not be required to procure the
consent of the mortgagors or of any other person in the conveyance.
Clause (8) was as follows. After payment of
the balance of the purchase money the purchaser shall be entitled to the rents
and profits of the said property. The vendors as the mortgagees are not in
possession of the property and will not do anything to deliver possession of
the property to the purchaser. The vendors as the mortgagees shall not be able
to give vacant or symbolic possession of the property to the purchaser. On
payment of the balance of the purchase price the purchaser shall at his own
cost be at liberty to take such steps as the purchaser may deem necessary for
obtaining possession of the property from the mortgagors.
Clause (33) provided as follows. If the
mortgagors shall deposit all the amounts due to the vendors as mortgagees in
court or pay the same to the vendors or their attorneys between the date of
sale and the completion thereof and if as a result thereof the vendors have to
reconvey the property to them or if the vendors cannot thus proceed with the
sale and the sale is not completed on that account the vendors shall return the
said deposit to the purchaser without any interest and/or costs and the vendors
as such mortgagees shall not be held liable for any damage.
Counsel for the appellant advanced these
First, under section 69 of the Transfer of
Property Act a mortgagor confers on the mortgagee a power of sale through Court
Or without intervention of court. The power of sale is of the entire legal
estate of the mortgagor. Second, when such a power is conferred it is agency
coupled with interest under section 202 of the Indian Contract Act, the agency
cannot be revoked without payment to mortgagee.
Third if the power is acted upon revocation
even on payment cannot nullify acts pursuant to powers. Reliance was placed on
sections 203 and 204 of the Indian Contract Act.
Fourth, if the act done pursuant to power is
that the property is put up for sale and it is knocked down it is an act done
by the mortgagee for mortgagor In 346 other words it is as if an act done by
the mortgagor. The, sale pursuant to the power is a subsequent act within the
meaning Transfer of Property Act and this subsequent act will extinguish the
mortgagor's right of redemption.
Fifth, in a suit for specific performance by
auction purchaser the purchaser will be entitled to specific performance
because it is a sale by mortgagor.
Counsel for the appellant relied on two
English decisions. These are: Waring (Lord) v. London and Manchester Assurance
Co. (1), and Property & Bloodstock Ltd. v. Emerton(2) in support of the
propositions that the mortgagor's right to redemption would be extinguished
when the mortgagee exercised the power of sale and the third party entered into
a binding contract to purchase the property.
The English decisions are based on the
provisions of the English Law of Property Act. The provisions create a statutory
power of sale, which gives to a mortgagee power to sell the mortgaged property,
and it means that the mortgagee has power to sell out and out by private
contract or by auction, and subsequently to complete the conveyance. The
English decisions are that if a mortgagee exercises power under section
100(1)(i) of the Law of Property Act, 1925, to sell the mortgaged property by
public auction or by private contract it is binding on the mortgagor before
completion unless it is proved that he exercised it in bad faith.
It was said in the Property & Bloodstock
case (supra) that the contract for sale by the mortgagees to the purchaser
precludes the mortgagor from his right of redemption pending completion even if
the property is sold subject to one or more conditions. The English decision
naturally notices distinction between condition precedent and the terms of
contracts of sale, namely, conditions dealing with matters of title for
carrying out the contract. The mere fact that the label "condition"
happens to be attached to conditions does not preclude its being in the latter
category of "condition" or matter of title. The condition that the
sale is subject to the reversioner's licence being obtained where necessary is
held in the English decision to be commonly regarded as no more than a term of
the contract relating to title.
The provisions in the Transfer of Property
Act relevant to the purpose of present appeal are sections 54, 60 and
69. Under section 54 of the Transfer of
Property Act, sale is a transfer of ownership in exchange for a price paid or
promised or part-paid and part promised. Such transfer in the case of tangible
immovable property of the value of one hundred rupees and upwards, or in the
case of a reversion or other intangible thing can be made only by a registered
instrument. A contract for the sale of immovable property is a contract that a
sale of such property shall take place on terms settled between the parties.
An English Mortgage is defined in section
58(e) of the Transfer of Property Act. Where the mortgagor binds himself to
repay the mortgage-money on a certain date, and transfers the mortgaged pro(1)
(1935) Chancery 310. (2) (1968) L.R. Chancery perty absolutely to the
mortgagee, but subject to a proviso that he will retransfer it to the mortgagor
upon payment of the mortgage money as agreed, the transaction is called an
The Rights and Liabilities of Mortgagor are
dealt with in section 60 of the Transfer of Property Act. It is that at any
time after the principal money has become due, the mortgagor has a right, on
payment or tender, at a proper time and place, of the mortgage money, to
require the mortgagee (a) to deliver to the mortgagor the mortgage-deed and all
documents relating to the mortgaged property which are in the possession or
power of the mortgagee, (b) where the mortgagee is in possession of the
mortgaged property to deliver possession thereof to the mortgagor and (c) at
the cost of the mortgagor either to re-transfer the mortgaged property to him
or to such third person as he may direct, or to execute and to have registered
an acknowledgement in writing that any right in derogation of his interest
transferred to the mortgagee has been extinguished. There is a proviso that the
right conferred by this section has not been extinguished by the act of the
parties or by decree of a Court. The right conferred by section 60 of the Transfer
of Property Act is called a right to redeem. Therefore, the said section 60
provides for a right of redemption provided that the right has not been
extinguished by the act of parties.
Section 69 of the Transfer of Property Act
deals with mortgagees' power of sale. Under the said section 69(1)(c), a
mortgagee has power of sale without the intervention of the Court where power
is conferred by the mortgage deed and the mortgaged property or any part
thereof was on the date of the execution of the mortgage deed, situate within
the towns of Calcutta, Madras, Bombay or in any other town or area which the
State Government, may, by notification in the official Gazette, specify.
The principal question in this appeal is
whether the right to redemption has been extinguished by any act of the
parties. The English decisions are based on the provisions of the Law of
Property Act, 1925. In England sale is effected by the contract of sale, and in
India an agreement for sale is not a sale or transfer of interest. In England,
a mortgagee gets an equitable interest in the property.
Under the English doctrine a contract of sale
transfers an equitable estate to the purchaser. The Court does not assist the
mortgagor by granting him a remedy unless there is collusion on the part of the
In India there is no equity or right in property
created in favour of the purchaser by the contract between the mortgagee and
the proposed purchaser. In India, there is no distinction between legal and
equitable estates. The law of India knows nothing of that distinction between
legal and equitable property in the sense in which it was understood when
equity was administered by the Court of Chancery in England. Under the Indian
law, there can be but one owner that is, the legal owner. See Rani Chhatra
Kumari v. Mohan Bikram (1) (1) (1931) 58 I.A. 279.
348 A contract of sale does not of itself
create any interest in, or charge on, the property. This is expressly declared
in s. 54 of the Transfer of Property Act. See Rambaran Prasad v. Ram Mohit
Hazra(1) & Ors. C) The fiduciary character of the personal obligation
created by a contract for sale is recognised in section 3 of the Specific Relief
Act, 1963 and in section 91 of the Trusts Act. The personal obligation created
by a contract of sale is described in section 40 of the Transfer of Property
Act as an obligation arising out of contract and annexed to the ownership of
property, but not amounting to, an interest or easement therein.
In India, the word "transfer" is
defined with reference to the word "convey". The word
"transfer" in English law in its narrower and more usual sense refers
to the transfer of an estate in land. Section 205 of the Law of Property Act in
England defines: "Conveyance" includes a mortgage, charge, lease,
assent, vesting declaration, vesting instrument. The word "conveys"
in section 5 of the transfer of Property Act is used in the wider sense of
The right of redemption which is embodied in
section 60 of the Transfer of Property Act is available to the Mortgagor unless
it has been extinguished by the Act of parties.
The combined effect of section 54 of the
Transfer of Property Act and section 17 of the Indian Registration Act is that
a contract for sale in respect of immovable property of the value of more than
one hundred rupees without registration cannot extinguish the equity of
redemption. In India it is only on execution of the conveyance and registration
of transfer of the mortgagor's interest by registered instrument that the
mortgagor's right of redemption will be extinguished. The conferment of power
to sell without intervention of the Court in a Mortgage Deed by itself will not
deprive the mortgagor of his right to redemption. The extinction of the right
of redemption has to be subsequent to the deed conferring such power. The right
of redemption is not extinguished at the expiry of the period. The equity of
redemption is not extinguished by mere contract for sale.
The mortgagor's right to redeem will survive
until there has been completion of sale by the mortagee by a registered deed.
In England a sale of property takes place by agreement but it is not so in our
country. The power to sell shall not be exercised unless and until notice in
writing requiring payment of the principal money has been served on the
mortgagor. Further section 69(3) of the Transfer of Property Act shows that
when a sale has been made in professed exercise of such a power, the title of
the purchaser shall not be impeachable on the ground that no case had arisen to
authorise the sale. Therefore, until the sale is complete by registration the
mortgagor does not lose right of redemption.
It is erroneous to suggest that the mortgagee
is acting as the agent of the mortgagor in selling the property. The mortgagor
exercises his right under a different claim. The mortgagee's right is-different
from, (1)  1 S.C.R. 293.
349 the mortgagor's. The mortgagee exercises
his right under a totally superior claim which is not under the mortgagor, but
against him. In other words, the sale is against the mortgagor's wishes. Rights
and interests of the mortgagor and the mortgagee in regard to sale are
In view of the fact that only on execution of
conveyance, ownership passes from one party to another it cannot be held that
the mortgagor lost the right of redemption just because the property was put to
auction. The mortgagor has a right to redeem unless the sale of the property
was complete by registration in accordance with the provisions of the
The decision in Abraham Ezra Issac Mansoor v.
Abdul Latiff Usman(1) is correct law that the right to redeem a mortgage given
to a mortgagor under section 60 of the Transfer of Property Act, is not
extinguished by a contract of sale of the mortgaged property entered into by a
mortgagee in exercise of the power of sale given to him under the mortgage
deed. Until then. sale is completed by a registered instrument, the mortgagor
can redeem the mortgage on payment of the requisite amount.
The Madras decision reported in Meenakshi
Velu & Ors. v. Kasturi Sakunthala & Ors.(2) on which counsel for the
appellant relied is contrary to the view expressed in Ellappa Naiker and others
v. Sivasubramania Maniagaran,(3) and the aforesaid Bombay decision.
We are entirely in agreement with the Bombay
The Madras decision Meenakshi Velu & Ors.
v. Kasturi Sakunthala & Ors. (2) which holds a contrary view on which counsel
for the appellant relied is wrong.
For the foregoing reasons, the appeal is
dismissed with costs to respondent no 1.
P.H.P. Appeal dismissed.
(1)I.L,R, (1944) Bom. 549. (2) 1.1 .R, (1967)
3 Madras 161.
(3) (1936) 71 Madras Iaw Journal 607.