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Judgment
Viswanatha Sastri, J.—This Second Appeal is preferred by the Plaintiff whose suit for redemption of a usufructuary mortgage or for compensation in the alternative, was dismissed by the District Judge of Chittoor on appeal from the Court of the Subordinate Judge. The facts so far as they are now material are these. Sripada Rao and Raghavendra Rao were brOrs. who together owned a one-eighth share of Keelkalpat-tadai village. Sripada Rao died in February 1944. Raghavendra Rao is alive and is the husband of the Plaintiff. Under Ex. B-4, dated 21st July 1922, Sripada Rao executed a usufruptuary mortgage of the-one-eighth share of the village in favour of the 1st Defendant''s deceased father for Rs. 1,000. It is admitted that this mortgage was binding on the entire one-eighth share of the village including the share of Raghavendra Rao though he was not a party to Ex. B-4. The two brOrs. partitioned their properties under Ex. A-1, dated 17th October 1928, as a result of which Raghavendra Rao got a 1/16th share of the village for himself. He conveyed his 1/16th share to his wife, the Plaintiff, under Ex. A-2, dated 16th February 1944.
On 17th December 1943, Sripada Rao sold the-entire l/8th share of the village to the 2nd Defendant (the son-in-law and agent of the mortgagee) under Ex. B-8 for Rs. 1,500 directing the vendee to discharge the mortgage under Ex. B-4. It is the case-of the Defendants that the mortgage has been discharged. In 1948, the Plaintiff sued for redemption of a l/16th share of the village on payment of a moiety of the mortgage money due under Ex. B-4, impleading the son of the deceased mortgagee, the mortgagee''s son-in-law and.agent as well as the purchaser of the mortgaged property under Ex. B-8, and?
the son of the latter, as Defendants 1, 2 and 3 respectively. Plaintiff''s case was that the equity of redemption in respect of a 1/16''th share of the village which belonged to her husband Raghavendra Rao had not been validly conveyed to the 2nd Defendant by Sripada Rao under Ex. B-8, the brother having become divided in 1928.
The Defendants pleaded that the l/8th share of the village had been allotted to the share of Sri-pa Rao at a partition between him and his brother Ragfnrrendra Rao in 1921 and diat the entire l/8th share had therefore been validly conveyed to the 2nd Defendant under Ex. B-8. This plea was found against and the Courts below have held that the 1/lGth share of Raghavendra Rao in the equity of redemption had not been validly conveyed to the 2nd Defendant by Sripada Rao under Ex. B-8. The Defendants further contended that the l/16th share of Raghavendra Rao had-been sold away in execution of the decree in O.S. No. 475/32 on the file of the District Munsif''s Court, Shoh''nghur, and that the Plaintiff had no title to the property. It is necessary to refer to a few facts surrounding the execution sale. The entire village was sold for arrears of peishkush payable to the Government and the Rajah of Chettinad who was entitled to a hall-share in the village had the revenue sale set aside on payment of the arrears of revenue and incidental expenses.
The Rajah then brought O. S. No. 475 of 1932 for contribution from the other shares of the village. To this suit, Sripada Rao, Raghavendra Rao and their mortgagee, the deceased father of the 1st Defendant, were impleaded as Defendants 4 to G. The Rajah claimed a first charge on the shares of the Defendants in the village in respect of the amount payable to him by way of contribution and his claim which was valid in law, was upheld by the Court. 1''ho Rajah obtained a decree on 17th August 1934, for Rs. 129-11-2 realisable in execution as a first charge on the other half share of the village belonging to the several Defendants in O.S. No. 475 of 32. The suit being one for contribution the liability of the different sharers in the village was separately fixed. The decree was not satisfied. The Rajah brought the property to sale in execution and purchased the 1/Sth share of the village, with which we are now concerned, at a Court sale held on 3rd January 1944. It was while the proceedings in execution of the decree in O.S. 475/32 were pending that the 2nd Defendant, the son-in-law and agent of the mortgagee, purchased the l/8th (Share of the village from Sripada Rao under Ex. B-8, dated 17th December 1943.
The 2nd Defendant whose title under Ex. B-8 had been extinguished by the purchase of the Rajah at the Court sale held in execution of the charge decree obtained by him, eventually paid a sum of Rs. 400 to the Rajah and obtained from him a patta, Ex. s'' B-ll, dated 5th February 1948, in favour of his son, to the 3rd Defendant. The effect of this transaction was H| that the kudiwaram interest in the l/8th share of p| the village was conveyed by the Rajah to the 3rd Defendant. It has been found by the Courts below and this finding is not "now challenged - that the ffi�3rd''Defendant was only a benamidar for his father, 2nd Defendant who paid the consideration for B-ll. The defence to the suit is that by reason for the Court sale held in execution of the decree on prior charge, the Rajah became the owner of the entire l/8th share of the village and Raghavendra Rao lost all title to the property.
The Plaintiff as a vtnolee from Raghavendra Rao had acquired no title to the property. The mortgage, Ex. B-4, which the Plaintiff claimed to redeem was extinguished by the Court sale held for realisation of the amount due on a prior charge under the decree in O. S. No. 475 of 1932. The Court sale in favour of the Rajah having been confirmed, he got an absolute title to the property free from the claims of the mortgagors and the mortgagee under Ex. B-4. Thereafter, tile Rajah was free to convey the property or the kudiwaram interest therein to anybody he chose. The fact that the 2nd Defendantluippened to be the purchaser of the kudiwaram interest from the Rajah did not create any right in the Plaintiff to sue for redemption of the mortgage, Ex. B-4. This line of defence proved successful and the District Judge negatived the Plaintiff''s right to redeem the mortgage, Ex. B-4.
2a. There was also an alternative claim by the Plaintiff for compensation or damages which was partially decreed by the Subordinate Judge, but disallowed by the District Judge on appeal. The Plaintiff''s claim for compensation was based on the ground: that under die mortgage Ex. B-4, the mortgagee washable for payment of the revenue due to die Government, that it was by reason of his default in payment of the revenue, the l/8th share of the village came to. be sold in execution of the decree in O. S. No. 475/ 32 and that the property having been lost to the mortgagor by reason of the default of the mortgagee, the latter was bound to pay compensation equivalent to the value of the property lost to the mortgagor. This alternative claim of the Plaintiff was-accepted by the Subordinate Judge.
The learned District Judge, however, held that the Plaintiff was merely in the position of an assignee'' from Raghavendra Rao of a right to sue for damages. That such a right could not be validly transferred:
and that the claim for compensation or damages was therefore unsustainable. He also held that the mortgagors who were parties to the suit in O. S. No. 475/. filed by the Rajah could have paid the small amount claimed by him by way of contribution and thus averted the Court sale of the l/8th share of the village and that they having failed to mitigate the damages, were disentitled to any relief. The Plaintiff was in the same position as the mortgagor. In this view, the learned District Judge dismissed the suit with costs.
Exhibit B-4 was, as already stated, a usufruetuary mortgage under which the deceased father of the 1st Defendant was put in possession of the mortgaged property. u/s 76 (c) of the Transfer of Property Act, the mortgagee in possession was bound, in the absence of a contract to the contrary, to pay the Government revenue and all other charges of a public nature. Exhibit B-4 expressly provided for payment by the mortgagee of the jodi, road
cess Vagaira''. It was held by the Courts below and I agree with their decision - that this provision Ex. B-4 is wide enough to include of the village payable to the Government. In fact, the 2nd Defendant the son-in-law and agent of the mortgagee., who was in possession and management of the mortgaged properties,'' admitted the rnortgagee''s liability to pay the peishkush vide Exs. A-26 A-27 and A-28.
of tbe default of the mortgagee payment of tne peishkush. On behalf of the Plaintiff, it was urged before the District Judge diat die sale of the mortgaged property to die 2nd Defendant by Sripada Rao under Ex. B-8, was benami for the mortgagee himself, that die subsequent acquisition of tide to the kudiwaram interest under Ex. B-ll from the Rajah was also on behalf of the mortgagee, though Ex. B-ll stood in die name of the 3rd Defendant and that notwithstanding the execution sale and the purchase of the l/8th share by tire Rajah, the mortgagee who had acquired the property from the Rajah in die name of his benamidar should submit to redemption. This contention was repelled by die learned District Judge for reasons which I summarise below.
Though die Court sale in execution of die decree in O.S. No. 475/32 was brought about by the default of the mortgagee in paying the peishkush, still the decree in O. S. No. 475/32 was properly obtained,'' the proceedings in execution of die decree were regularly conducted and die Court sale in favour of the Rajah which was confirmed in due course, effectually extinguished die mortgage Ex. B-4 and the equity of redemption. This was not a case of a mortgagee taking advantage of his own default hi payment of revenue and making a fraudulent purchase at the revenue sale in the name of a benamidar. The Rajah who was the purchaser at die Court sale was a stranger and after his purchase, he was free to do what he liked with die properly. The mortgagee having acquired die property from the Rajah who had an indefeasible title to it as absolute owner, stood in die same position as the Rajah and could not be compelled to submit to redemption at the hands of the Plaintiff, die title of the mortgagor having been extinguished by the Court sale.
I am unable to accept the opinion of die learned judge as a correct statement of the law. It Js well settled that a mortgagee in possession who allows the mortgaged lands to be sold in consequence of his default in payment of die revenue and who purchases the property at die revenue sale either himself or in the name of a benamidar cannot resist redemption by the mortgagor or his transferee on the ground of a statutory extinction of the equity of redemption by the revenue sale. In such a case, the mortgagor or his assignee or transferee could redeem the mortgage just as if there had been no revenue sale vide Nawab Sidhee Nuzur Ally Khan v. Raja Ojoodhayaram Khan, 10 Moo Ind App 540 (PC) (A), Lakshmayya v. Bolla Redely, ILR 26 Mad 385 (B), Chitta Bhula Vs. Bai Jamni, and Jamila Khatun v. Mahamud Khatun, AIR 1918 Cal 192 (D).
In Janki Singh v. Debinandan Prasad, 15 Cal WN 776 (E), the mortgagee who was a minor was in possession of the mortgaged property through an agent. There was default in payment of the revenue and the property was purchased on behalf of the minor at a revenue sale. It was held that the mortgagee was in the position of a trustee and as the sale was occasioned by his default, he could not rely on his purchase for defeating the title of the mortgagors; and that it was immaterial whether there was fraud ox. not. Referring to the mortgagee, the learned Judges observed:
This would be so whenever inere was any fraud or chicane on his Rart, or not; for in certain respects and for certain purposes, the mortgagee in possession is a trustee for the mortgagor and cannot take advantage of that position to the detriment of the mortgagor.
This case went up on appeal to the Judicial Committee. Sir Lawrence Jenkins delivered the judgment of die Board in Deo Nandan Prosad v. Janki Singh, ILR 44 Cal 573 : (AIR 1916 PC 227 at p. 228) (F), observed:
He (mortgagee) was, however, represented by agents and when the position created by them is regarded as a whole, it leads to die conclusion that the Government revenue was intentionally allowed by them to fall into arrear with a view to the properties being put up for sale and bought on behalf of the minor. If this be the true view, as their Lordships hold, then, however free from personal blame the minor may have been, he cannot profit by his agent''s deliberate default committed in breach of the terms of the mortgage. As against his mortgagor, therefore, die mortgagee cannot be allowed to hold for himself the advantage gained by die default for which his agents were responsible.
The cases cited above are sufficient authority for holding that if there is a breach of an obligation cast upon the mortgagee elder by law or under the terms of die deed and this breach results in a sale of die mortgaged properties under a paramount claim and the purchase is made by die defaulting mortgagee, or on his behalf, die equity u/s 90 of the Trusts Act will fasten die mortgage to the property in his hands.
The same principle has been applied to cases i where a subsequent mortgagee required under his mortgage deed to pay off a prior mortgage or charge, defaults in doing so and the mortgaged property is sold for realisation of die prior mortgage or charge, and purchased by the defaulting mortgagee himself or by a benamidar for him. Though die execution sale held for the realisation of the prior mortgage or charge would extinguish the rights of the subsequent mortgagee as well as the equity of redemption of the mortgagor, still, when the. property is purchased by the defaulting mortgagee himself or some other person for his benefit, he must hold die property subject to the same rights and liabilities as obtained at die date of the sale vide Kannan v. Kombi Achan, ILR 1947 Mad 616: AIR 1947 Mad 209 (G) and Kombi Achan and Others Vs. K.C. Velayudhan and Others, Where payment of public taxes or prior mortgages is a duty cast upon the mortgagee, either by law or under the contract of mortgage, he is like a trustee and cannot affect the right of the mortgagor by defaulting to pay the taxes or the prior mortgages and by purchasing the property either directly or through Anr. at a sale held for realisation of die taxes or die prior mortgage debfs.
The further question is, whether this principle is applicable to a case where the purchase at die revenue sale or Court sale is made by a stranger for his own benefit and without any reference to the mortgagor or mortgagee and the purchaser subsequently conveys the property to the mortgagee for valuable consideration. Does the inter-position of a bona fide purchase of the property by a stranger at revenue sale or Court sale as the case may be, make any difference to the application of the principle recognised in Section 90 of the Trusts Act, if the property comes back to the mortgagee under a purchase from the purchaser at the revenue sale or Court sale?
On this point, there is a difference of judicial opinion. One view is that the revenue sale, once it becomes final and is free from fraud or collusion statutorily extinguishes the title of the mortgagor and the mortgagee alike and unless the revenue sale is set aside, the mortgagor cannot claim to redeem relying on his antecedent title as owner of the equity of redemption. As a result of the revenue sale, the mortgagor has lost his title to the property and the stranger purchaser has acquired an absolute and indefeasible title thereto. The fact that the purchaser at the revenue sale subsequently sells the property to the defaulting mortgagee himself does not have the effect of reviving the mortgage or vesting in the mortgagor a right to redeem the property. This view is supported by Gauri Slianker v. Sheotahal, AIR 1936 Pat 434 (I).
The other view is that if a mortgaged property sold for arrears of revenue owing to the default of the . mortgagee and purchased by a stranger is subsequently purchased by the mortgagee himself, the mortgage is revived & attaches itself to the property and could be redeemed by the mortgagor or his heirs or assigns. Though the property vested in the stranger purchaser at the revenue sale free of the defaulting mortgagee purchases tin: properly from the stranger purchaser, then as between him and the mortgagor the position is the same as if the mortgagee himself had purchased at the: revenue sale vide ILR 26 Mad 585 (B).
In the case above cited, the question arose as to the liability of the properly to be sold in enforcement of a mortgage after it came back to the mortgagor who defaulted in payment of the revenue and allowed the property to be purchased by a stranger. It was the converse of the present ease; but the principle of that decision would equally apply here though the obligation sought to be enforced relates to redemption and not to sale. The purchaser at a revenue sale gets the property free from all encumbrances because the land revenue is the first and paramount liability on i the property. If, however, the rights of such a purchaser become vested in Anr. person whose default occasioned the sale, then the immunity from the obligations that the property would have enjoyed had it remained with the stranger purchaser would cease and the obligation would again attach to the property when it comes back to the defaulter.
The reason of tin''s rule appears In be that: a person cannot be allowed to take advantage of his own wrong and make a profit at the expense of the person wronged by pleading that there had been a statutory extinction of the mortgage - vide . Illustration to Section 90 and Section 65 of the Trusts Act. The same principle would apply where a puisne mortgagee who r& is bound under the terms of his mortgage to discharge H a prior mortgage defaults to do so and allows the prior mortgagee to bring the mortgaged property to sale rerin execution of his decree and the puisne mortgagee acquires the property from the purchaser at the sale held in execution of tire decree on the prior mort-Rs (Sept.)'' 1957 Andh. Pra. D.F./28.
1 am bound to follow the decision in ILR 26 Mad 385 (B), in preference to AIR 1936 Pat 434 (I), and I may venture to add that the former decision lays down a rule which is in consonance with justice and equity.
It was argued that though the sale-in execution of the decree in O. S. No. 475/32 was brought about by the default of the mortgagee, still as the mortgagors were also parties to the suit along with the mortgagee, the default in payment of the decree was as much that of the mortgagors as of the mortgagee and that die principle of Section 90 of the Trusts Act would not apply. The learned Subordinate Judge held that the proportionate amount payable by the owners of J/8th share of the village by way of contribution to the Rajah was about Rs. 40 and relying on the assurance of the mortgagee and his agent the amount would be paid, the mortgagors did not take any further steps. Indeed under his mortgage, Ex. B-4, die mortgagee was bound to pay the revenue.
The Subordinate Judge further observed and, in my opinion, rightly that the conduct of the 2nd Defendant (the son-in-law and agent of the mortgagee) in purchasing the entire l/8th share of the village from Sripada Rao alone suggests that'' he deliberately allowed the properties to be sold in Court auction in spite of his acquisition of the ownership of the property before the Court sale, with the idea of acquiring the entire l/8th including the share of Raghavendra Rao from the purchaser, for a small sum. The mortgagee or his agent was evidently anxious to acquire the entire equity of redemption but Raghavendra Rao would not convey his l/16tli share. There-lore it is likely that the small sum payable to the Rajah under the decree in O. S. No. 475/32 was not paid by the mortgagee and the Court sale was allowed to take place by reason of such default.
Be it as it may, the fact that the mortgagors were parties along with the mortgagee to O. S. No. 475/32 does not make any difference so far as their rights and liabilities inter se are concerned. No doubt the Rajah obtained a decree jointly against the mortgagors and mortgagee, but it is clear that as between them it was the mortgagee that was liable to pay the decree amount. The failure or the omission of the mortgagee to pay the decree amount was wrongful and it was in consequence of that wrong that the property was sold and purchased by the Rajah.
Where property is sold owing to the wrongful default of the mortgagee himself he cannot be allowed to claim it on the ground of his own wrong and make a gain out of his own breach of contract. There is authority for the view that a purchase by the mortgagee based on a breach of obligation by him must in equity ensure for the benefit of the mortgagors and that it uiak''.''s no difference to the enforcement of this equity that the mortgagor also is a party to the decree under which the sale is held - vide Thakur Jaikaran Singh and Others Vs. Sheo Kumar Singh and Another, .
The learned District Judge while he dealt with the case on the assumption that the purchase by the 2nd Defendant (the agent and son-in-law of the mortgagee) under Ex. B-8 was for the benefit of the mortgagee did not, however, subscribe to this view. I must therefore deal with the case on the footing that the purchase by the 2nd Defendant was on his own account and that the purchase under Ex. B-8 derated to convey only tlie l/16th share of Sripada Rao, the vendor under Ex. B-8. The l/16th share of Raghavendra Rao did not pass to the 2nd Defendant under Ex. B-8 in view of the prior partition that had been effected between Sripada Rao and Raghavendra Rao under Ex. A-1 dated 17th October 1,928.
The purchase by the 2nd Defendant was during the pendency of the proceedings in execution of the decree in O. S. No. 475/32. On his own statement, he was fully aware of the liability of the mortgagee'' under the terms of the usufructuary mortgage to pay the peishkush and therefore to satisfy the decree for contribution in O. S. No. 475/132. After his purchase, the 2nd Defendant redeemed the usufructuary mortgage Ex. B-4 which was binding on the entire l/8th share of the village and which was for Rs. 1,000. All that the 2nd Defendant could claim by reason of his redemption of the mortgage was that he was in the position of a co-mortgagor who had redeemed the mortgage and that u/s 91 of the Transfer of Property Act he had acquired the rights of the mortgagee. At the same time he had also acquired the half share of the mortgagor, Sripada Rao, in the mortgaged property. u/s 60 of the Transfer of Property Act, the Plaintiff would be entitled to redeem Raghavendra Rao''s half share of the mortgaged property on payment of a proportionate share of the mortgage money. This right of the Plaintiff is not affected merely by reason of the mortgaged property having been allowed to be sold by Court to the decree-holder in execution of the decree in O. S. No. 475/32 owing to the default of the 2nd Defendant who had stepped into the shoes of the mortgagee, to pay up the decree amount. If the property had remained in the hands of the Rajah, the purchaser at the Court sale, the Plaintiff would have no right to redeem since the mortgaged property had been sold for the realisation of a paramount charge. As however the property has again been acquired by the 2nd Defendant from the Rajah and as the 2nd Defendant claiming the rights of the mortgagee was in default in payment of the decree amount which led to the execution sale, he is in the position of a mortgagee quad die share of the Plaintiff.
The principle recognised in Section 65 of the Trusts Act in Lakshmayya v. Bolla Roddi, IL 11 26 Mad 385 KB), would apply to the case. If a person in the position of a trustee defaults to make payment of a paramount charge which he is bound to pay and suffers a sale of the property for the realisation of the charge and afterwards himself becomes the owner of the property, the property again becomes subject to the trust notwithstanding the fact that the intervening purchaser is a purchaser in good faith and for consideration and is therefore unaffected by the trust. In such cases, the trust revives on the acquisition of the property by the trustee and the trustee is bound to restore the land to the trust. This wholesome rule of equity was formulated in Section 65 of the Trusts Act in order to prevent trustees from having an interest in conflict with their duly, and purchases by issues of trust property have always been looked into with zealous scrutiny by the Courts.
The 2nd Defendant is in the position of the mortgagee whom he has discharged and ho is also 5ft (he position of the owner of a half share of the mortgaged, property. u/s 82 of the Transfer of Property Act, the mortgaged properties are bound to-contribute rateably to the mortgage debt. Therefore-the mortgagee is bound to pay himself a half share of the mortgage debt and to that extent die mortgage debt stands discharged. The remaining half share of the mortgaged property is liable for a half of the mortgage debt., i.e., for Rs. 500. The Plaintiff will therefore be entitled to a decree for redemption of a l/16th share of the village, Keelkalpattadai on. payment of Rs. 500 to Defendants 2 and 3. The half share of the kudiwaram interest acquired by Defendants 2 and 3 under Ex. B-ll is the property that is. liable to redemption by the Plaintiff and not the properties comprised in Ex. B-4. Time for payment, six months from this day.
The Second Appeal is allowed but in view of the difficulty created by the long inaction of the mortgagors the parties will bear their own costs throughout.
Leave refused.