Ambu Nair vs Kelu Nair and Another

There is no repudiation here (in the reply by the mortgagee in 1913) of the allegation that the relationship of mortgagor and. mortgagee subsists. It is not alleged that the mortgagor has lost his rights to redeem. These notices were in 1913. It is therefore clear that from 1892 till 1917 there wa3 no question raised that the possession of the mortgagee under the mortgage, dated the 8th of December 1892 and the compromise, dated the 2nd of January 1899, was possession under a subsisting mortgage for Rs. 31,000 which was liable to be redeemed.

The Plaintiff in this suit acting under the power conferred by Clause (2) of the razinama decree, Exhibit 0, deposited Rs. 31,000 in Court and filed an application for execution praying for re-delivery of possession of the properties. This application was opposed by the mortgagee on the gr6und that the execution of the decree was barred by limitation. There were other grounds of objections which it is not necessary to consider now. It was contended for the Plaintiff who was the first Petitioner in the execution application that time began to run only in default of the Respondents to deliver possession on the Petitioner''s depositing the mortgage amount on the Vishu day of any one year they chose within the period of sixty years fixed for re-redemption under the Limitation Act and that his cause of action only arose when the mortgagee refused to deliver possession on the money being paid. The Subordinate Judge, however, upheld the contention that the application was barred by limitation. As regards the maintainability of a fresh suit to redeem, he did not decide the question. All that he said in paragraph 8 of the judgment was:

Whether a fresh suit for redemption by the Petitioners will be barred by the aforesaid decree is a question which we need not go into at present.

It appears also from the order, dated the 10th of November 1920, that both the parties wanted the question of limitation to be taken up as a preliminary question. The order is filed as Exhibit I. Against this order an appeal was filed in the High Court and on the 20th of December 1921 the appeal was dismissed and the order of the Subordinate Judge was confirmed. The judgment of the High Court is filed as Exhibit II in the case. The learned Judges held that Article 181 was the article applicable to a case like the present, that the starting point of limitation was the date when the right to apply for execution accrued and that the right to apply for execution accrued from the date of the decree and they preferred to follow the decision of the Bombay High Court in Maruti v. Krishna ILR 1899 28 Bom., 592. to the decision of the Allahabad High Court in Chhedi v. Lalu ILR 1902 All. 300. The learned Judges observed:

On our construction of this decree it is not a case of option given to the mortgagors to make payment on successively recurring dates and a number of other cases which have been quoted by the learned vakil for the Appellants need not be dealt with by us for that reason.

The learned Judges did not express any opinion as to whether a suit for redemption would be maintainable. This judgment has become final and therefore it has to be taken that the remedy to redeem by way of executing the decree has become barred. The effect of this judgment is that the compromise which is embodied in the razinama decree, Exhibit C, virtually cut down the period of redemption from sixty years to three years, if it should be held that executing the decree is the only method by which the mortgagor or his representatives could redeem.

We do not think the razinama decree in O.S. No. 22 of 1898 renders the present suit res judicata. There was no adjudication in that suit of any of the questions raised here. We need only refer to the decision of their Lordships of the Privy Council in Maina Bibi v. Chaudhri Vakil Ahmad ILR 1924 All. 250. In that case, the heirs of a deceased Mohammadan filed a suit and obtained a decree that, on payment of a certain sum of money they should get possession from the widow who claimed to be in possession in lieu of her decree-debt, and that, if the money was not paid in six months, the suit should be dismissed. They did not pay as directed and several years afterwards filed a suit for possession conditionally and alternatively on payment of the sum.

The main contention of the Appellant before us is that Section 47 of the CPC 1908, which corresponds to Section 244 of the Act of 1882 and to Section 11 of the Act of 1861, bars a separate suit in all cases where the party can execute the decree. Section 47 runs as follows:

All questions arising between the parties to the suit in which the decree was passed, or their representatives, and relating to the execution, discharge or satisfaction of the decree shall be determined by the Court executing the decree and not by a separate suit.

The contention is that the clause in paragraph 2 of the razinama decree which states that, if the mortgagors pay the kanom amount of Rs. 31,000 mentioned in paragraph 1 of the decree on the Vishu Shankaramana Vaide of any one year in a lump sum, he, the mortgagee, Should relinquish his arwar right and deliver the said property back to the mortgagors, and that, if he fails to deliver the same in that manner the morgagor should take possession of it by taking out execution, limits the right to execution, and that, if that right is extinguished, the right of redemption also is extinguished, as a separate suit would not lie. As we pointed out before, so far as the parties to the razinama decree were concerned, they neither at the time of the razinama decree nor for several years thereafter thought that the right of redemption would be barred in three years. Till the execution application was put in 1920, in the various proceedings, the parties acted on the footing that the mortgage was still subsisting and could be redeemed. It cannot be said that the parties, when they entered into the razinama, agreed that there should be this clog on the equity of redemption, that the right to redeem should be barfed in three years, when the law allowed sixty years. Even assuming that they did, it is clear that if such a clause was put in a mortgage document, it would be void as a clog on the equity of redemption.

Section 60 of the Transfer of Property Act enacts:

At any time after the principal money has become payable, 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 the mortgage-deed, if any, to the mortgagor, (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 (where the mortgage has been effected by a registered instrument) to have registered an acknowledgment in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished:

Provided that the right conferred by this section has not been extinguished by act of the parties or by order of a Court.

It should be observed here that unlike other sections dealing with mortgages, Section 60 does not permit parties to contract themselves out of its provisions. In Muhammad Sher Khan v. Raja Seth Swami Dayal ILR 1921 All. 185 (P.C.) , the question was whether a clause which suspended the right to redeem was valid. Their Lordships of the Privy Council after referring to Section 60 observed:

The section is unqualified in its terras and contains no saving provision, as other sections do, in favour of contracts to the contrary. Their Lordships, therefore, see no sufficient reason for withholding from the words of the section their full force and effect.

The proviso as regards the right being extinguished by act of the parties has been in several cases held to mean an act done after the mortgage has been entered into, such as, release of the right to redeem or sale. In Fairclough v. Swan Brewery Co. Limited 1912 A.C. 665. Lord Machaghten observed:

It is now firmly established by the House of Lords that the old rule still prevails and that equity will not permit any device or contrivance being part of the mortgage transaction or contemporaneous with it to prevent or impede redemption.

It has been argued that the strict rule of the Courts of Equity has been relaxed and reference has been made to G. and C. Kreglinger v. New Patagonia Meat and Cold Storage Co., Ltd. 1914 A.C. 3. We do not think the rule that you cannot clog the equity of redemption at the time of the mortgage has been affected by this decision. Lord Parker at page 60 observes:

If once you come to the conclusion that the parties intended that the property should be reconvened on payment off of the moneys secured, any provision which would prevent this must be rejected as inconsistent with and repugnant to the true intention. But, on the other hand, if you once come to the conclusion that this was not the real intention of the parties, then the transaction is not one of mortgage at all.

The conclusion which the learned Lord came to has been thus summarized by him:

My Lords, after the most careful consideration of the authorities, I think it is open to this House to hold, and I invite your Lordships to hold, that there is now no rule in equity which precludes a mortgagee, whether the mortgage be made upon the occasion of a loan or otherwise, from stipulating for any collateral advantage, provided such collateral advantage is not either (1) unfair and unconscionable, or (2) in the nature of a penalty clogging the equity of redemption, or (3) inconsistent with or repugnant to the contractual and equitable right to redeem.

There can be little doubt that the intention of the parties in the present suit, when they entered into the compromise embodied in Exhibit C, was clearly to keep the mortgage alive, that possession was taken under the mortgage and there is nothing to suggest that the parties ever intended that the equity of redemption should be lost if the mortgagor did not repay the mortgage money in three years, for this is the effect of the clause put in as to recovery in execution of possession. There can be little doubt that this clause, if interpreted as extinguishing the right to redeem if execution is not taken out within the time limited by law, that is three years, works a great hardship on the mortgagor. It is stated by the Counsel for the Respondent that the property is now worth more than a lakh of rupees. Counsel for the Appellant says that ho is not in a position to give the value of the property. But, having regard to the extent and nature of the property as disclosed in the schedules to the plaint, the income of the property which, even according to the deed of compromise, was considerable and the fact that the mortgagees were willing to lend money on a second mortgage, there can be little doubt that the value of the property at the date of the compromise and at the date when the mortgagor applied for execution by depositing Rs. 31,000 into Court was considerably in excess of the mortgage money.

Even if the decision in G. and C. Kreglinger v. New Patagonia Meat and Gold Storage Coy., Ltd. 1914 A.C. 4. establishes a new principle, we think the proviso to Section 60 which refers to the extinguishment of the right by act of the parties must, having regard to the authorities above cited, be an act subsequent to the transaction and it is difficult to see how, when the law has been codified by Section 60, which as interpreted by their Lordships of the Privy Council, prevents any party from contracting himself out of it, it is possible to relax the rule on any of the considerations which influenced the Court in the above case. Altered conditions may be a good ground for relaxing a rule of equity but can hardly be a ground for not applying the provisions of a statutory enactment.

It has been argued that, even if the clause in the razinama as to execution was invalid and unenforceable, the fact that that compromise has been made a decree of Court validates the transaction. It should be noted in the present case that all that the Court did was to embody in the decree the terms of the compromise. It is not suggested that there was any adjudication or any enquiry by the Court before the razinama decree was passed. All that the parties consented to is the agreement as embodied in the razinama decree. We do not think in these circumstances the fact that an illegal term in an agreement is by consent of parties embodied in a consent decree could make that term enforceable or could be a defense in a subsequent suit to redeem. We may in this connexion refer to the decision of their Lordships of the Privy Council in Great North-West Central Railway v. Charlebois 1899 A.C. 114. In that case, a term which was ultra vires of a company was embodied in a contract and also in a consent decree of Court. It was contended that the fact that the term is embodied in the decree prevented the parties from disputing it. Lord Hobhouse in delivering the judgment of their Lordships of the Privy Council observed at page 123 (end):

But the difficulty is to reconcile an opinion that the contract is ultra vires with an opinion that a judgment obtained, as this was, is a binding judgment. The authorities referred to by the Supreme Court do not relate to contracts ultra vires. It is quite clear that a company cannot do what is beyond its legal powers by simply going into Court and consenting to a decree which orders that the thing shall be done.

After pointing out that the legality of the act was not one of the points substantially in dispute and that, if that was the subject of a fair compromise in Court, it may make a difference, his Lordship said that a judgment obtained upon such a contract which is ultra, vires cannot be of more validity than the invalid contract on which it was founded.

So far as decrees founded on contracts are concerned, it has always been held that the Court can give relief in separate suit or in execution proceedings where the terras of the consent decree are against the provisions of any statute. In Nagappa v. Venkat Rao ILR 1900 Mad. 265. a suit was filed by the landlord for arrears of rent and possession. The parties arrived at a compromise and the decree contained a stipulation that if default should be made in payment of rent within the time fixed for payment each year, the lease should be forfeited. Default was made and the Plaintiff applied in execution for possession and arrears of rent. It was held that, inasmuch as the decree passed by the Court was a mere adoption of the contract which existed between the parties to it, it was competent to the Court to relieve against the forfeiture under the general provisions of the law.

In Lakshmanaswami Naidu v. Bangamma ILR 1902 Mad. 31., it was held that any terms of a contract which are opposed to public policy are invalid and would not be enforced by the Courts, and that if such terms are embodied in a compromise decree those terms would not be enforced. In this case the compromise decree provided for the sale of an office attached to a temple involving service of a personal nature and entitling the holder to receive emoluments.

In Krishnabai v. Hari Govind ILR 1906 31 Bom. 15., there was a consent decree passed which created the relationship of landlord and tenant and which contained a clause for forfeiture if the rent was not paid. There was nothing in the decree which provided any relief against the terms embodied in the decree. The Plaintiff filed a suit for possession on the ground that the right to possession which was conferred by the consent decree accrued owing to forfeiture. It was held that, as the consent decree created the relationship of landlord and tenant, the Court could relieve against forfeiture. Sir. Lawrence Jenkins, C.J. after stating that as it was an incident of those relations that the right of forfeiture was subject to relief, that incident must still apply when those relations are established by a decree passed in accordance with the agreement, observed:

It was laid down in Wentworth v. Bullen 1829 B. and C. 840,850, 109 E.R., 313, 316., and has, since been repeatedly affirmed that ''the contract of the parties is not the less a contract, and subject to the incidents of a contract, because there is superadded a command of a Judge'' and this in my opinion lends a sanction to the conclusion I have expressed.

Beaman, J.

By private agreement, converted into a decree, parties cannot empower themselves to do that which they could not have done by private agreement alone

and referred to Great North-West Central Railway v. Gharlebois 1899 A.C. 114.

Applying these principles to the facts of the present case, the position is this. The compromise of the suit on the mortgage, Exhibit A, which is now the foundation of liability did not put an end to the relationship of mortgagor and mortgagee but, on the contrary, affirmed it. The decree perpetuated the relationship of mortgagor and mortgagee and did not dissolve that relationship. It enforced the right of the mortgagor under the mortgage to obtain possession, and provided for the right of the mortgagor getting back possession on payment of Rs. 31,000. The ordinary incidents of that relationship are that, even though a term is fixed for redemption by the parties, the party is allowed to redeem within the period of 60 years provided by the Limitation Act, and that any provision in the agreement which in effect limits the right to redeem by a clause that the right is to be exercised by execution (which necessarily reduces the period to throe years) is as invalid as if there was a clause saying that if the property is not redeemed in three years the property should be lost. This clause was embodied in the decree by consent of all parties. It is, therefore, a case where the parties have done what Section 60 of the Transfer of Property Act prohibits. In a suit to redeem, it seems to us to be no defense to state that the sole remedy is the remedy by execution, which remedy the parties had no right to insert as being a clog on the equity of redemption. In this view, Section 47 of the Code would not debar the Plaintiff from filing a suit to redeem.

We think that, on a proper construction of the compromise decree, the clause that the mortgagor should take possession of the property by executing the decree is not the sole right which the mortgagor has. Unlike decree for redemption under the Transfer of Property Act, the decree does not say that if money is not paid as stipulated, the right to redeem is lost. What the parties contemplated was that they should be entitled to the benefit of the summary way of getting possession. The fact that the Plaintiff does not choose to exercise that right would not deprive him of the larger remedy he has of getting possession by suit. If he had applied within three years by execution to redeem the property, he would have had to pay only a few rupees as stamp duty under the Court Fees Act and he would have got possession on payment into Court of Rs. 31,000. If he wants to have it done by a suit, a very heavy stamp duty of about Rs. 1,492 would have to be paid and, as a matter of fact, such a stamp duty was paid in the present suit to redeem. It also appears to us that the existence of that clause would not prevent redemption as the case falls within the decision of their Lordships of the Privy Council in Sri. Raja Papamma Rao v. Sri. Vira Pratapa H.V. Ramachandra Razu I.L.R 1696 mad. 249, where the facts were shortly these:�The Plaintiffs sued to redeem a mortgage on the ground that it was discharged by the rents and profits appropriated by the mortgagee. The mortgagors undertook in the mortgage deed to repay a sum of Rs. 2,011 with interest by four annual instalments, mortgaging as security a village belonging to them. The mortgagee sued the mortgagors upon this bond and prayed for a decree directing the Defendants to pay the amount then due with interest by means of the mortgaged property. The decree of the District Judge was:

In accordance with the custom prevailing in the Courts in this Presidency three months'' time will be allowed to the Defendants within which to pay up the whole sum now decreed, principal and interest and costs, failing which the Plaintiff shall be put in possession of the immovable and movable property specified in the bond sued upon, and in the plaint and schedule, as provided in the terms of the bond.

We may state in passing that in this case the decree was a consent decree which directed that if the mortgage was not redeemed in three years, the mortgagee should take possession of the properties. Under this decree, the mortgagee took out execution and got possession as the mortgagee in the present case acting under Clause 2 of the razinama decree got possession in execution. Then the Plaintiffs, mortgagors, filed the suit to redeem alleging that if an account was taken it would be found that the whole mortgage had been discharged by the usufruct. The defense was that, by virtue of the terms of the decree, the property had become the absolute property of the mortgagee and that it was not competent to the parties to go behind the decree. The Subordinate Judge dismissed the suit on the ground that the mortgage was foreclosed if the money was not paid in three years. On appeal this judgment was reversed by the High Court. Their Lordships of the Privy Council affirmed the decision of the High Court. Lord Hob House in delivering the judgment of their Lordships of the Privy Council, after referring to the decree of the District Judge and the fact that the decree stands because no appeal was filed against that decree, observed:

The decree therefore stands and is binding on the parties; and the mortgagee took possession under it. He has since sold the property, but that does not affect the rights of the mortgagor. The question is in what character was the possession taken. If in the character of a mortgagee, the mortgagor had a right to redeem, which was not barred by the time the suit began.

His Lordship, after dealing with the contentions of Mr. Mayne, further observed:

It is sufficient that the mortgagee, not being entitled to foreclosure, and not asking for it, got a decree which did not purport to work foreclosure. It purported to give possession ''as provided in the terms of the bond''. That was impossible, for there were no such terms; but it purported to do that, and did not purport to put an end to the bond and to the relations of mortgagor and mortgagee altogether. It could, though subject to correction on appeal, give possession, and did so. The mortgagee thereupon became mortgagee in possession; and as such he must submit to be redeemed.

It seems to us difficult to distinguish the facts of the present case from the facts of the case in 19 Mad. referred to above. The decree with which their Lordships were dealing was an executable decree and, for the purpose of Section 47, the addition of a clause allowing parties to execute makes no difference, if the decree is in fact executable. The test applied by their Lordships is ''what was the character of the possession taken under the decree'', and if the character was as mortgagor and mortgagee, their Lordships hold that the right to redeem followed.

Reference has been made by the Appellant''s Advocate to Hari Ravji Chiplunkar v. Shapurji Hormasji Shet ILR 1886 10 Bom. 461 (P.C.), and it was contended that the decision in that case lays down a contrary rule. We do not think the facts of that case are similar to the facts of the case with which we are dealing now. In that case, a suit was filed by the mortgagees to recover their mortgage money by sale and a decree was passed in accordance with the award of arbitrators to the effect that the Defendants were to pay in all Rs. 2,396 to the Plaintiffs on a date which would be fixed and should redeem the land which till payment was to remain in the possession of the Plaintiffs. This state of things continued from September 1825, and in 1877 a suit was filed to redeem. The Subordinate Judge held that the mortgage had entirely merged in the decree and that execution was barred. This judgment was confirmed by the High Court. Their Lordships of the Privy Council held that, as the execution of the decree was barred, no fresh suit for redemption would lie on the rights created by the decree. Their Lordships held that, on the frame of the plaint, the Plaintiff could not fall back on a right to redeem the original mortgage, as he, in the plaint, did not seek to redeem the mortgage of 1806, which, on the face of it, would be barred but for some acknowledgment and no such acknowledgment was alleged. Their Lordships left open the question whether, if a proper suit was filed on the original mortgage and an acknowledgment was proved so as to get over the bar of limitation, that suit would be maintainable. In the case before us, the suit to redeem is not barred as it is within 60 years of the date of the mortgage. It is clear from the facts of the case in 10 Bombay 461 that the suit was not a suit to enforce the term of the mortgage as to possession and to keep the rights of the parties subsisting, but was, on the contrary, a suit by the mortgagee to get back his money. In cases where the mortgagee sues to get back his money, of course the decree fixes the period for payment and provides either for sale or foreclosure. And the effect of the decree is to put an end to the relationship of mortgagor and mortgagee after the period mentioned in the decree and to substitute new rights created by the decree. This is clearly brought out by the provisions of the Transfer of Property Act and Order 34, Code of Civil Procedure, which relate to mortgage decrees.

This case has been considered by the Bombay High Court-in Abdul Rajack v. Vaman Ganesh ILR 1921 45 Bom. 1835. That was a suit to redeem a mortgage of 1874. There was a previous redemption decree of 1881, the terms of which were that the Plaintiff should pay the Defendant Its. 400 with interest by annual installments and that, if the Plaintiff failed to pay any installment, the Defendant should take possession of the land mortgaged and receive the produce thereof in lieu of interest, and, on the Plaintiff paying the principal amount at the end of any falsie year, the land belonging to the Plaintiff should be returned to him. It was contended that the suit to redeem was barred by reason of the previous decree and reliance was placed on 10 Bombay 461. Sir Norman Macleod, C.J. observed:

This case belongs to that numerous class of cases in which the question arises whether the mortgagor is in effect bringing a suit to execute a previous redemption decree, or whether he is seeking to exercise the right to redeem, as a right which was reserved to him by the previous decree. On the authority of Hari Ravji Chiplunkar v. Shapurji Hormasji Shet ILR 1886 10 Bom., 461 if the suit must be treated as a suit claiming a right to execute the previous decree, then undoubtedly it must be dismissed. But if it comes within the Full Bench decision of the Court in Tani Bagavan v. Haribin Bahavani Dubal ILR 1887 16 Bom. 659., then the Plaintiff is entitled to succeed. The decision must depend entirely on the nature of the decree in the previous suit; and the difficulty in reconciling the various decisions lies in the fact that the terms of the previous decree will generally vary, and further the decision of the question may depend upon whether the previous suit had been brought by the mortgagor or the mortgagee.

After referring to Tani Bagavan v. Haribin Bhavani Dubal ILR 1887 16 Bom. 659., the learned Chief Justice observes:

It seems to me that in the decree in Suit No. 480 of 1881 the right to redeem was reserved and that the Plaintiff is now entitled to sue for redemption.

Applying this test to the present case, it seems to us that the compromise decree, far from putting an end to the right to redeem, was passed on the basis that the mortgage right should subsist. We are of opinion that, in any view of the case, the present suit is not barred by Section 47 as contended for by the Appellant.

In the view we take, it is unnecessary to consider the contention raised by the learned Advocate-General for the Respondents as to the Defendant being stopped from contending that the mortgage is not redeemable by reason of the various proceedings we have already referred to, or the contention that the decree in the suit on the second mortgage obtained by the mortgagees on the basis that the first mortgage was subsisting operates as res judicata or as an stopple, or the contention that the mortgagees having admitted for over the statutory period of twelve years their possession as being possession under the mortgage a fresh title to redeem arises irrespective of the compromise decree.

The appeal fails and is dismissed with costs.